Doubts persist after the US UU. And China sign an initial trade agreement

BEIJING / WASHINGTON (Reuters) – China will increase spending on US products in exchange for the reduction of some tariffs under an initial trade agreement signed by the two largest economies in the world on Wednesday, deactivating an 18-month row but leaving numerous unresolved thorny problems.

Beijing and Washington promoted the “Phase 1” agreement as a step forward after months of talks to stop the start, and investors greeted the news with relief. Even so, there was skepticism that the commercial relationship between the US. UU. And China was now on the way to recovery.

The agreement does not address the structural economic problems that led to the trade conflict, does not completely eliminate tariffs that have halted the global economy and set purchasing goals that are hard to reach, analysts and industry leaders said.

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 providing a future of economic justice and security for American workers, farmers and families,” Trump said in ramblings in the White House with 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.

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.

The future of soybean sank after Liu’s comments, a sign that farmers and merchants had doubts about the purchase goals.

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.

The key indices of the world stock market rose to record levels before stalling in the hope that the agreement will reduce tensions, while oil prices fell in the face of doubts that the pact stimulates global economic growth and demand for crude.

“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.

“Very sensitive issues, such as the prohibition of US exports to several Chinese companies, greater scrutiny of Chinese investments abroad and China’s application of its commitment to treat foreign and domestic companies equally within China it’s likely to be news all year long, “he said.

Trump and his economic advisors had pledged to attack Beijing’s long-standing practice of propping up state-owned companies and flooding international markets with low-priced products as the commercial war intensified.

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 divert imports from other business partners to the United States.

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.

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

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.

CCTV, China’s state television channel, said the deal would satisfy China’s increasingly demanding consumers by supplying products such as dairy, poultry, beef, pork and processed meat from the United States.

RATES TO STAY

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.

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.

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

Tariffs on Chinese imports have cost US companies $ 46 billion. There is increasing evidence that tariffs have raised input costs for US manufacturers, eroding their competitiveness.

Diesel engine manufacturer Cummins Inc (CMI.N) said Tuesday that the agreement will leave him paying $ 150 million in tariffs for engines and castings he produces in China. He urged the parties to take measures to eliminate all tariffs.

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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 Lincoln Feast; Edition by Michael Perry

Our Standards:The principles of trust of Thomson Reuters.

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