Economic News

U.S. and China Reach “Phase One” Trade Deal

After more than a year of heightened tensions, back-and-forth tariffs, and plenty of near misses, it seems that the United States and The People’s Republic of China have reached a preliminary trade deal. As a result both nations are calling off new rounds of tariffs that were set to go into effect. Additionally the U.S. has cut tariffs on some Chinese imports by half.

Word of the deal was first announced by President Donald Trump on Twitter. The President wrote, “We have agreed to a very large Phase One Deal with China. They have agreed to many structural changes and massive purchases of Agricultural Product, Energy, and Manufactured Goods, plus much more. The 25% Tariffs will remain as is, with 7 1/2% put on much of the remainder.” He went on to confirm that the additional tariffs that had been scheduled to take effect on December 15th would be canceled. Those would have impacted $160 billion worth of goods from China including consumer electronics. Meanwhile CNN Business reports that the 25% tariffs will continue to on $220 billion in imports while the 7.5% — formerly 15% — tariffs affect $120 billion in products. For their part, Beijing has also agreed to cancel tariffs that were set to take effect the same day as the U.S.-imposed ones. This round would have put 25% duties on such items as corn and American-made autos.

According to President Trump, this deal is only the beginning. In a follow-up tweet the Commander in Chief wrote, “We will begin negotiations on the Phase Two Deal immediately, rather than waiting until after the 2020 Election.” That potential deal would apparently be more comprehensive than the “phase one” edition.

The deescalation of the U.S.-China trade war was welcomed news for the markets, which have regularly moved up or down as negotiations have been called off and reengaged over the past several months. Of course it’s also potentially good for consumers who would most likely have had to bear the brunt of any new import tariffs (assuming that manufacturers increased their prices accordingly, that is). As for what’s ahead, many are now expecting the United States and President Trump to leverage the remaining tariffs to work toward a new “phase two” deal. However, if past negotiations are any indication, it could be some time before such an agreement is reached. Still this “phase one” deal seems to be a positive step forward for two of the world’s largest economies.