Tuesday September 22nd, 2020 4:28PM

Thornier trade issues await after initial US-China deal

By The Associated Press
Related Articles
  Contact Editor


President Donald Trump on Wednesday described an initial trade agreement with China as “righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers and families."

The president was preparing to sign a trade agreement with China that is expected to boost exports from U.S. farmers and manufacturers and ease trade tensions between the two countries going into November’s presidential election.

For Trump, the White House ceremony gives him the opportunity to cite progress on a top economic priority on the same day that the House votes to send articles of impeachment to the Senate for a trial.

Trump and China's chief trade negotiator, Liu He, met at the White House to sign the modest agreement. It is intended to ease some U.S. economic sanctions on China while Beijing would step up purchases of American farm products and other goods. The deal would lower tensions in a fight that has slowed global growth, hurt American manufacturers and weighed on the Chinese economy.

But the “Phase 1” agreement would do little to force China to make the major economic changes such as reducing unfair subsidies for its own companies that the Trump administration sought when it started the trade war by imposing tariffs on Chinese imports in July 2018.

Larry Kudlow, Trump’s chief economic adviser, said the agreement vindicated the president’s strategy of using tariffs in trade negotiations, though not in every instance. “I think with China he was exactly right,” Kudlow said. ”I think the tough tariffs hurt their economy and made them much more amenable to a good deal.”

Most analysts say any meaningful resolution of the main U.S. allegation — that Beijing uses predatory tactics in its drive to supplant America's technological supremacy — could require years of contentious talks. Skeptics say a satisfactory resolution may be next to impossible given China's ambitions to become the global leader in such advanced technologies as driverless cars and artificial intelligence.

This first phase “hardly addresses in any substantive way the fundamental sources of trade and economic tensions between the two sides, which will continue to fester,” said Eswar Prasad, a Cornell University economist and and former head of the International Monetary Fund's China division.

The thornier issues are expected to be taken up in future rounds of negotiations. But it’s unclear when those talks might begin, and few observers expect much progress before the U.S. presidential election in November.

“Phase 2 -- I wouldn’t wait by the phone,’’ said John Veroneau, who was a U.S. trade official when George W. Bush was president and is now co-chair of the international trade practice at the law firm Covington & Burling. “That is probably a 2021 issue.’’

The U.S. has dropped plans to impose tariffs on an additional $160 billion in Chinese imports, and it cut in half, to 7.5%, existing tariffs on $110 billion of good from China.

Beijing agreed to significantly increase its purchases of U.S. products. According to the Trump administration, China is to buy $40 billion a year in U.S. farm products — an ambitious goal for a country that has never imported more than $26 billion a year in U.S. agricultural products.

The deal may be most notable for what it doesn't do. It leaves in place tariffs on about $360 billion in Chinese imports — a level of protectionism that would have been unthinkable before Trump took office.

Beijing’s retaliatory tariffs affect more than half of American exports to China. The average U.S. tariff on Chinese imports has risen from 3% in January 2018 to 21% now.

The administration argues that the deal is a solid start that includes Chinese commitments to do more to protect intellectual property, curb the practice of forcing foreign companies to hand over sensitive technology and refrain from manipulating their currency lower to benefit Chinese exporters. In advance of Wednesday's signing, the Treasury Department on Monday dropped its designation of China as a currency manipulator.

By maintaining significant tariffs on Chinese imports, the administration retains leverage to force Beijing to abide by its commitments — something the United States says Beijing has failed to do for decades.

The administration contends that however narrow the first phase may be, it represents a significant breakthrough.

Derek Scissors, China specialist at the American Enterprise Institute, said the trade war has already delivered a benefit for Trump, even if it hasn’t forced Beijing to make major changes to its economic policy: Trump’s tariffs have reduced Chinese exports to the United States and narrowed America's trade deficit with China.

The president has long lambasted the U.S. trade gap with Beijing as a sign of economic weakness, though many economists disagree. A wide trade deficit can actually reflect economic strength because it means that a nation's consumers feel prosperous and confident enough to spend freely — on imported goods as well as on home-grown goods.

So far this year, the U.S. deficit with China in the trade of goods has declined by 16%, or $62 billion, to $321 billion compared with a year earlier. The deficit will narrow further if Beijing lives up to its pledges to buy dramatically more American imports.

Trump’s tariff increase have proved to be a headwind for China's economy, which was already slowing, though the damage has been less than some expected. Chinese global exports eked out a 0.5% increase in 2019 despite a plunge in sales to the United States, according to Chinese customs data.

Chinese exporters responded to Trump’s tariff hikes by shipping goods to the United States through other countries and by stepping up sales to Asia, Europe and Africa. The government reported double-digit gains in 2019 exports to France, Canada, Australia, Brazil and Southeast Asia.

Economists said the tariff war slowed Chinese growth, which hit a multi-decade low of 6% in the quarter ending in September, by as little as 0.6 percentage point. Weak domestic demand and the cooling of a construction boom inflicted more damage.


AP Business Writer Joe McDonald in Beijing and Associated Press writer Darlene Superville contributed to this report.

  • Associated Categories: Associated Press (AP), AP National News, AP Online National News, Top General short headlines, AP Online Headlines - Washington, AP Elections, General Election News, General Presidential Election News, AP Business, AP Business - Economy
© Copyright 2020
All rights reserved. This material may not be published, broadcast, rewritten, or redistributed without permission.
Thornier trade issues await after initial US-China deal
 President Donald Trump is describing an initial trade agreement with China as “righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers and families
12:02PM ( 8 minutes ago )
Target, like other retailers, did not have a Merry Christmas
Target's rare miss in holiday sales raises concerns about the challenges ahead for the retail industry
11:57AM ( 13 minutes ago )
Putin engineers shakeup that could keep him in power longer
President Vladimir Putin has engineered a surprise shakeup of Russia's leadership and proposed changes to the constitution that could keep him in power well past the end of his term in 2024
11:56AM ( 14 minutes ago )
Associated Press (AP)
Billionaire businesswoman Penny Pritzker endorses Joe Biden
A major Democratic fundraiser and former commerce secretary under President Barack Obama has endorsed Joe Biden for president
11:19AM ( 51 minutes ago )
The Crossing: What to watch as impeachment heads to Senate
There's pomp, history and a bit of presidential politics at play as the House sends two articles of impeachment against President Donald Trump to the Senate for trial
9:06AM ( 3 hours ago )
Key takeaways from Democratic presidential debate in Iowa
There was a lot of pre-debate chatter about a coming fight between Senators Bernie Sanders and Elizabeth Warren over Warren's assertion Sanders told her in 2018 that a woman couldn't be elected president
8:27AM ( 3 hours ago )
AP Elections
Can a woman win the presidency? Clash exposes deeper issue
The smoldering political flare up between Elizabeth Warren and Bernie Sanders has thrust to the center of the Democratic presidential race an issue that has been gnawing at them for over three years: Can a woman beat Donald Trump? Many Democratic voters openly support the idea of the first female president but quietly worry that inherent gender biases could make an election victory difficult
10:29PM ( 13 hours ago )
The Latest: Warren says women on stage have outperformed men
Bernie Sanders and Elizabeth Warren declined an opportunity to continue their recent campaign trail feud during Tuesday night’s debate, but Warren still took on her progressive opponent
10:08PM ( 14 hours ago )
Biden, Sanders spar over war in last debate before primaries
The Democratic Party’s leading presidential candidates sparred over Iraq, war and foreign policy Tuesday night in the final debate showdown before primary voting begins
9:37PM ( 14 hours ago )
General Election News
China says Taiwan policy intact despite election results
China says it will not change its policy of annexing Taiwan through its “one country, two systems" framework, despite the heavy turnout in favor of pro-independence candidates in last weekend's presidential and legislative elections
10:43PM ( 13 hours ago )
Debate to highlight eroding diversity in Democratic field
When Democratic candidates for president step up to debate Tuesday night in Iowa, there won't be any black faces on the stage
4:21PM ( 19 hours ago )
Warren, Sanders backers feud after 'Pocahontas' text message
A text message that referred to Democratic presidential candidate Elizabeth Warren as “Pocahontas” that was sent through rival Bernie Sanders' volunteer text messaging system led to social media feuding and confusion among supporters of both candidates
3:33PM ( 20 hours ago )
General Presidential Election News
Documents suggest Thomas Markle may testify in Meghan suit
Court documents reveal that the estranged father of Meghan, Duchess of Sussex could be called as a defense witness in her lawsuit against the Mail on Sunday newspaper
11:28AM ( 42 minutes ago )
Putin names head of tax service as new prime minister
The Kremlin says President Vladimir Putin has named Tax Service chief Mikhail Mishustin as Russia's new prime minister
11:20AM ( 50 minutes ago )
Thornier trade issues await after in initial US-China deal
The United States and China are set to take a step toward trade peace after 18 months of economic skirmishing
11:20AM ( 50 minutes ago )
AP Business
Health care and tech stocks lead early gains on Wall Street
Stocks are opening slightly higher on Wall Street, led by gains in health care and technology companies
9:41AM ( 2 hours ago )
World shares slip on jitters over China-US trade deal
Stock markets are mostly lower as conflicting reports raised concerns over the likely impact of a trade deal to be signed by the U.S. and China
7:56AM ( 4 hours ago )
Protests take toll on Hong Kong tourism
Visitor numbers to Hong Kong fell by nearly 40% in the second half of last year amid clashes between police and anti-government protesters
6:55AM ( 5 hours ago )
AP Business - Economy
Target, like other retailers, did not have a Merry Christmas
Target's rare miss in holiday sales raises concerns about the challenges ahead for the retail industry
11:57AM ( 13 minutes ago )
Putin engineers shakeup that could keep him in power longer
President Vladimir Putin has engineered a surprise shakeup of Russia's leadership and proposed changes to the constitution that could keep him in power well past the end of his term in 2024
11:56AM ( 14 minutes ago )
Fever chart: Earth had its hottest decade on record in 2010s
Two U.S. agencies say the decade that just ended was by far the hottest ever measured on Earth, capped off by the second-warmest year on record
11:55AM ( 15 minutes ago )
Judge agrees to block Trump order on refugee resettlement
A federal judge has agreed to block the Trump administration from enforcing a presidential executive order allowing state and local government officials to reject refugees from resettling in their jurisdictions
11:54AM ( 16 minutes ago )
Ahead in the clouds: Alibaba plans to change the Olympics
Chinese tech giant Alibaba wants to be a game-changer at the Olympics with its cloud computing and other services
11:51AM ( 19 minutes ago )