WASHINGTON – President Trump is expected to sign an initial trade agreement with China on Wednesday morning, ending the first chapter of a protracted and economically damaging struggle with the world's second largest economy.
The trade pact is expected to open Chinese markets to more US companies, increase agricultural and energy exports, and provide greater protection for US technology and trade secrets. But it retains most of the tariffs Trump has placed on Chinese products worth $ 360 billion, and maintains the threat of additional punishment if Beijing does not comply with the terms of the agreement.
"This is a great victory for American companies and farmers," Treasury Secretary Steven Mnuchin on the Fox Business Network said Tuesday, describing the agreement as "fully applicable."
The agreement will limit more than two years of tense negotiations and growing threats that sometimes seemed destined to plunge the United States and China into a permanent economic war. Trump, who campaigned for the presidency in 2016 with the promise of being tough on China, pressured his negotiators to rewrite the trade terms that he claimed had destroyed American industry and jobs, and imposed record tariffs on products Chinese in a bid to get Beijing to access their demands.
The president's approach can give political results. He will be heading for a re-election campaign with China's commitment to strengthen its intellectual property protections, make large purchases of US products and seek other economic changes that will benefit US companies.
But the agreement has many criticisms on both sides, who say that Trump's tactics have been random and economically damaging, and that the agreement leaves the most important economic problems unresolved.
In particular, the Chinese have rejected requests for broader changes in the structure of their economy. That includes a pattern of subsidy and support to key industries, such as solar and steel, that US companies say have allowed China to download cheap products it manufactures in the United States.
The agreement also does not address cybersecurity or China's strict controls on how companies handle data and cloud computing. China rejected US demands to include promises to refrain from hacking American companies in the text, insisting that it was not a commercial problem.
Management has said that it will address some of these changes in Phase 2 of the negotiations and will maintain the current tariffs in part to maintain leverage for the next round of talks. But Mr. Trump has already expired the term for another agreement after the November elections, and there is a deep skepticism that the two countries will reach another trade agreement in the short term.
Meanwhile, the remaining rates will continue Inflict financial pain on American companies that depend on Chinese imports and consumers who buy their products.
The trade agreement contains a variety of victories for the American industry, including the opening of markets for financial services, pharmaceuticals, beef and poultry. China has pledged to increase its purchases of food, energy, manufactured goods and services by $ 200 billion over two years, although many analysts say that figure seems unrealistic given what the United States currently produces.
China has also pledged not to force US companies to deliver their technology as a condition for doing business there, under penalty of new tariffs. Beijing also promised to refrain from devaluing its currency, the renminbi, to gain an advantage in export markets, among other promises.
These terms are likely to benefit American companies and increase exports in the coming months, potentially reducing the trade deficit with China, which has become a focal point for Trump.
But those victories have had a high price. The uncertainty created by the tariff threats and Trump's commercial approach have weighed on the economy, raising prices for companies, delaying corporate investments and slowing growth worldwide. Companies with exposure to China, such as Deere & Company and Caterpillar, have reduced some workers and reduced income expectations, partly citing the trade war.
Clete Willems, a partner of Akin Gump who left the White House last year, said the deal was important to show that the United States and China could solve problems with each other despite disagreements and high tensions.
"We do not solve all the problems with China in this agreement, there is no doubt about it," Willems said. "But what was done is really significant."
Trump and Liu He, Vice Premier of China, are expected to sign the agreement at the White House at 11:30 a.m.
Alan Rappeport contributed reports.