Breakthrough in US-China trade war
As 2019 winds down, apprehensions remain that the “phase one” trade deal agreed to by the US and China earlier this month will not completely end the trade war between the two countries that had a massive impact on established global multi-lateral trade arrangements.
US President Donald Trump’s “America first” policy was the precursor to the trade war, which led to both sides imposing tariffs worth hundreds of billions of dollars on each other’s exports.
After protracted negotiations conducted in fits and starts over the year, the two countries unveiled a preliminary deal in December whereby the US will reduce some tariffs on Chinese goods while China will increase purchases of American farm, energy and manufactured goods. The “phase one” deal also addresses some US complaints about China’s intellectual property practices.
The US won’t proceed with 15% tariffs on Chinese goods worth nearly $160 billion, including mobile phones, laptops and clothing, and China cancelled retaliatory tariffs, including a 25% tariff on US-made cars. The US will also cut by half the tariff rate on a $120-billion list of Chinese goods, to 7.5%.
China agreed to increase purchases of American manufactured goods, including agricultural goods, energy and services, by at least $200 billion over the next two years and the move is expected to reduce the $419-billion US trade deficit with China. Beijing also committed to increase purchases of Washington’s agriculture products by $32 billion over two years.
The preliminary deal includes stronger Chinese legal protection for patents, trademarks and copyrights, and enhanced procedures to combat online infringement and pirated and counterfeit goods. There is also a commitment by China to eliminate pressure on foreign firms to transfer technology as a condition for market access.
However, even if this preliminary deal is fully implemented, it may not end the trade frictions between the world’s two economic superpowers or their bruising battle to shape global trade arrangements.
At a time when the US under Trump is becoming increasingly protectionist, China has even repeatedly reached out to India to help protect and beef up multi-lateral trade arrangements.
The Trump administration has rewritten trade deals or begun negotiations for new ones with Mexico, Japan, Canada, South Korea and India, and whittled down multilateral trade arrangements. Tariff barriers raised by both China and the US have had an impact on global supply chains and manufacturing, and the uncertainty caused by the trade war has hit the global economy.
The US and China are certain to continue their efforts to achieve domination of the global economic order in 2020, and several unresolved issues remain between the two sides, such as Washington’s efforts to block Chinese firm Huawei’s rollout of 5G technology, that could have implications for countries such as India.