US President Donald Trump and Chinese vice premier Liu He will today sign the Phase One trade deal, reached in December.
The agreement is a major step forward in the trade war between the two sides, as it aims to boost Chinese purchases of US manufactured products, agricultural goods, energy and services.
The deal will reduce US tariffs on Chinese goods in exchange for increased Chinese purchases of US products by some $200 billion.
The 18 months of tariff conflict have slowed the global economic growth, after they have been imposed in the disagreements between the two sides over China’s technology ambitions.
The US will keep 25% tariffs on about $250 billion of Chinese imports, along with 7.5% duties on roughly $120 billion of Chinese imports.
An official at the US Chamber of Commerce said the deal represents “a sigh of relief from both sides”. However, he warned that it leaves significant challenges intact.
“If the Chinese don’t achieve those purchase price targets, the US could impose new tariffs or remove existing promises or all sort of things could happen”, Deborah Elms, executive director of Asian Trade Centre said.
The deal fails to address digital trade restrictions and China’s heavy cybersecurity regulations that are a trouble for US technology firms in China. It also fails to address the US complaints about China’s trade and intellectual property practices.
US trade representative Robert Lighthizer promised, however, that these issues are key US priorities for Phase 2 negotiations with China.