China and USA UU. Sign initial trade agreement but doubts and tariffs persist

BEIJING / WASHINGTON (Reuters) – China will increase purchases of US goods and services by $ 200 billion over two years in exchange for the reduction of some tariffs under an initial trade agreement signed by the two largest economies in the world, deactivating an 18-month row that has affected global growth.

Key global stock market indexes rose to record levels after the deal was signed Wednesday in Washington, but then stalled due to concerns that it would not relieve trade tensions for a long time, with numerous thorny problems still unsolved .

While acknowledging the need for further negotiations with China to solve a number of other problems, President Donald Trump hailed the agreement as a victory for the US economy. UU. And the commercial policies of its administration.

“Together, we are correcting the mistakes of the past and offering a future of economic justice and security for American workers, farmers and families,” Trump said Wednesday in hesitant statements at the White House alongside US and Chinese officials.

Chinese Deputy Prime Minister Liu read a letter from President Xi Jinping in which the Chinese leader praised the agreement as a sign that the two countries could resolve their differences with the dialogue.

“While the markets seemed to take this agreement as a risk signal, we should all be aware that the headlines on trade, particularly trade between the United States and China, will be a constant feature of 2020,” said Hannah Anderson, strategist at JP Morgan Asset Management global markets in Hong Kong.

The centerpiece of the agreement is a promise from China to buy at least an additional $ 200 billion in US agricultural products and other goods and services for two years, above a baseline of $ 186 billion in purchases in 2017, said the White House.

The commitments include $ 54 billion in additional energy purchases, $ 78 billion in additional manufacturing purchases, $ 32 billion more in agricultural products and $ 38 billion in services, according to agreement documents published by the White House and The Ministry of Finance of China.

Liu said Chinese companies would buy $ 40 billion in US agricultural products. UU. Annually over the next two years “according to market conditions”, which may dictate the timing of purchases in a given year.

Beijing had refused to commit to buying fixed amounts of US agricultural products before, and signed new soy contracts

with Brazil since the commercial war began.

Later, Liu said the agreement would not affect the “interests of third parties,” apparently in reference to agreements made with other suppliers of agricultural products.

Chinese companies will import US agricultural products based on consumer needs, and market demand and supply, Liu told reporters, according to CCTV.

Although the agreement could be a boost for farmers, car manufacturers and heavy equipment manufacturers in the USA. In the US, some analysts question China’s ability to replace imports of other business partners with more shipments from the United States.

The agreement does not end retaliatory tariffs on US agricultural exports, makes farmers “increasingly depend” on purchases controlled by the Chinese state, and does not address “major structural changes,” Michelle Erickson-Jones, a wheat farmer and spokesman for Farmers for Free Trade, said in a statement.

Oil prices rose, aided by the expectations of more Chinese purchases of oil and gas in the United States.

Chinese Deputy Prime Minister Liu He and U.S. President Donald Trump shake hands after signing “phase one” of the trade agreement between the United States and China during a ceremony in the East Room of the White House in Washington, USA UU., January 15, 2020. REUTERS / Kevin Lamarque

Trump, who adopted a “United States First” policy with the goal of rebalancing world trade in favor of American companies and workers, said China had promised measures to address the problem of pirated or counterfeit products and said the agreement included strong protection of intellectual property rights.

Washington’s insistence on the “real teeth” enforcement mechanisms could tear the agreement if tariffs are reimposed for non-compliance.

The president of the House of Representatives of the United States, Nancy Pelosi, said that Trump’s strategy in China “inflicted profound long-term damage to American agriculture and shook our economy in exchange for more of the promises that Beijing has been breaking for years, “in a statement.

Earlier, the White House’s chief economic advisor, Larry Kudlow, told Fox News that the deal would add 0.5 percentage points to the growth of US gross domestic product. UU. Both in 2020 and in 2021.

Aviation industry sources said Boeing Co (PROHIBITION) He was expected to win an important order for China’s wide-body aircraft, including his 787 or 777-9 models, or a mixture of both.

The agreement promoted new victories for US companies seeking access to China’s $ 40 billion financial sector, but many of the changes were already underway with Beijing accelerating the pace of openness in the last year.

The central bank of China said that Chinese financial institutions are fully capable of coping with foreign competition and will strengthen financial supervision as the sector breaks free.


The Phase 1 agreement canceled the planned US tariffs. UU. For cell phones, toys and laptops made in China and halved the tariff rate to 7.5% on other Chinese products worth $ 120 billion, including flat-screen TVs, Bluetooth headphones and footwear.

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But it will enforce 25% tariffs on a range of $ 250 billion of Chinese industrial goods and components used by US manufacturers, and China’s retaliatory tariffs on more than $ 100 billion in US goods.

Market turmoil and investment reduction linked to the trade war would likely reduce global growth in 2019 at its lowest rate since the financial crisis of 2008-2009, the International Monetary Fund said in October.

Trump, who has been promoting the Phase 1 agreement as a pillar of his 2020 reelection campaign, said he would agree to eliminate the remaining tariffs once the two sides have negotiated a “Phase 2” agreement.

“We have already started discussions about a Phase 2 agreement,” Vice President Mike Pence said in an interview with the Fox Business Network.

Reports by Ryan Woo, Jeff Mason, Andrea Shalal and Dave Lawder; Additional reports by Echo Wang, Lisa Lambert, Susan Heavey Lisa Lambert and Doina Chiacu in Washington, Tim Aeppel in New York, Mark Weinraub in Chicago, Se Young Lee and Stella Qui in Beijing and Tim Hepher in Paris; Written by Michael Perry; Edition by Lincoln Feast

Our Standards:The principles of trust of Thomson Reuters.


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