Donald Trump and Liu He have agreed on purchases of agricultural goods but also on questions of intellectual property and financial services.
Donald Trump on Friday announced a partial but “very important” trade agreement with China, covering substantial agricultural purchases by Beijing, intellectual property and financial services.
In exchange, China got the US president to waive the 25-30% increase in punitive tariffs on $ 250 billion in Chinese imports to the United States, which was to come into effect on Tuesday.
“We have reached a very important Phase 1 agreement,” the US president told reporters in the Oval Office after meeting with Liu He, China’s top negotiator, along with US Treasury Secretary Steven Mnuchin, and US Trade Representative Robert Lighthizer.
“There was a lot of friction between China and the United States, now it’s love!” He said, indicating that two other phases were still to come.
However, the terms of the negotiation have yet to be put down on paper. A process which, according to the White House host, could take four to five weeks. He did not rule out signing, “or not”, a document with Chinese President Xi Jinping in Chile during the summit of the Association of Pacific Rim Countries.
Mr. Mnuchin, who was speaking to the President, was cautious. “We have a fundamental understanding on the key points. We have made a lot of progress, but we still have work to do, ”he noted. “We won’t sign a deal until we can tell the president it’s all on paper.”
This phase 1, according to Mr. Trump, involves purchases of farm goods for $ 40 billion to $ 50 billion per year. The president insisted at length on this amount, which is about two and a half times the peak of China’s purchases.
China imported $ 19.5 billion worth of US agricultural products in 2017, a number that fell to just over 9 billion in 2018.
“I recommend now that our farmers buy more land and bigger tractors” to meet the increased demand, the president joked.
Farmers – who form part of its electoral base – have suffered greatly from the trade war that began more than 18 months ago to force China to negotiate. The US government has released $ 28 billion in federal aid to mitigate their losses.
Politically, Donald Trump is under pressure as never since entering the White House: the Democrats have launched an investigation into an impeachment procedure, which appears to be supported by voters, according to several polls.
And the green light given by the president to Turkey to launch an anti-Kurdish operation in Syria earned him very virulent criticism even among his close supporters.
The agreement reached with China on Friday also includes elements on intellectual property – a right often flouted in China -, a wider opening of the Chinese financial services sector and a section on exchange rates.
For his part, the Chinese negotiator spoke of “substantial progress in many areas”. “We are happy,” Liu He added, hinting that the talks would continue.
On the other hand, no decision has been taken on the 15% tariffs on consumer goods which are due to come into force in December.
Impact on global growth
The English-language government daily China Daily had pushed Friday in the direction of a partial agreement, judging it “more realistic” and allowing “to end the impasse” of the trade war.
In any case, the main Wall Street indices ended up sharply.
The fate of the Chinese telecoms group Huawei, which the United States has heavily sanctioned, accusing it of collaborating with the Beijing intelligence services, is not part of the agreement.
Originally, Washington wanted a broad deal with significant structural reforms on the forced transfer of technology or subsidies to Chinese companies.
The Republican President said he was convinced that this agreement will be even broader in the long term.
The International Monetary Fund estimates that trade tensions and their side effects, such as the freezing of investments or disruptions in very complex international supply chains, will evaporate from global GDP $ 700 billion, i.e. equivalent of the Swiss economy, by 2020.