USA and China sign 'Phase 1' agreement to de-escalate trade war

Fri 17 Jan 2020
Posted by: William Barns-Graham
Trade News

us china trade war

The USA and China have signed an agreement to ease the trade war that has dominated the global trade agenda in recent years.

The USA and China have been increasing tariffs, resulting in increased import taxes on over £350bn worth of goods traded between the nations, disrupting global trade flows in the process and hampering global economic growth.

The deal signed in Washington this week by no means concludes the trade war, with most of the recently introduced or increased tariffs still in place.

It does, however, potentially begin a de-escalation of trade tensions as the talks enter their next phase.

Compromises on both sides

As part of the agreement, China is pledging to boost US imports by $200bn above 2017 levels, boosting its imports of agriculture by $32bn, manufacturing by $78bn and energy by $52bn. China has also agreed to improve its regulation and enforcement against counterfeiting, allowing overseas companies a better route to legal action over trade secret theft.

In return, the US has agreed to halve some of the new tariffs it has imposed on Chinese products over the last 2 years. However, the US will maintain 25% of tariffs on an estimated $360bn worth of Chinese goods, and China will do the same for the majority of its tariffs on $100bn worth of US products, according to the BBC.

President Trump said the new agreement will be “transformative” for the USA while Chinese leaders have called it a “win-win”, though both were keen to assert that is a “phase one” agreement.

The US administration will be looking to continue negotiating with China on a range of trade issues, including its state subsidies on key industries like agriculture and red tape preventing US firms from operating in the country.

Mr Trump has said that maintaining the majority of its tariffs will help to provide the USA with leverage in future trade talks.