14 Oct 2019
U.S.-Mainland China Trade Talks Yield Tariff Hike Suspension, IPR and Agricultural Commitments
Following a White House meeting with Vice Premier Liu He, U.S. President Donald Trump announced on 11 October that the United States and mainland China had come to a “very substantial phase one deal”. Trump also indicated that the deal will probably take three to five weeks to be finalised, which might allow for signature by Trump and President Xi Jinping at the November Asia-Pacific Economic Cooperation leaders summit in Chile. Once the phase one agreement is finalised, the two sides will ostensibly begin phase two negotiations right away and, if necessary, a phase three deal may also be pursued.
According to Trump, mainland China has made certain commitments on financial services and currency measures – including transparency into the foreign exchange markets and free markets – as well as various intellectual property, technology transfer, and sanitary and phytosanitary concerns. In addition, Beijing has committed to buy US$40 to US$50 billion worth of U.S. agricultural products.
In exchange, U.S. Treasury Secretary Steven Mnuchin told reporters that the United States will not increase from 25 percent to 30 percent the additional tariff currently in place under Section 301 on US$250 billion worth of mainland Chinese products (goods in lists 1, 2 and 3). However, U.S. Trade Representative Robert Lighthizer said the president has not yet made a final decision on the additional 15 percent tariff that is scheduled to go into effect 15 December on some US$160 billion worth of imports from mainland China.
With regard to the U.S. designation of mainland China as a currency manipulator, Mnuchin observed that the United States will be “making a decision on that and evaluating it.” Lighthizer also indicated that the bi-lateral agreement will have “a very elaborate consultation process” to ensure a “workable dispute settlement mechanism”, and noted that matters related to Huawei are not part of the agreement. Lastly, Trump remarked that this bi-lateral agreement will not require congressional action, as is required to implement the United States-Mexico-Canada Agreement.