ART OF THE DEAL: China Agrees to First Phase of Trade Deal With Trump

On Thursday, December 12, 2019, President Donald Trump signed off on a mini-trade deal with China.

Trump then followed up with the Phase One Deal with China on Friday, December 13, 2019.

This tentative agreement, which Trump describes as a “phase one” deal, codifies what was originally agreed to back in October.

It will demand that China significantly increase its purchases of U.S. agricultural products, open up its financial services sector, and implement new protections against the theft of intellectual property.

Trump tweeted, “We have agreed to a very large Phase One Deal with China. They have agreed to many structural changes and massive purchases of Agricultural Product, Energy, and Manufactured Goods, plus much more. The 25% Tariffs will remain as is, with 7 1/2% put on much of the remainder….”

He then added, “…..The Penalty Tariffs set for December 15th will not be charged because of the fact that we made the deal. We will begin negotiations on the Phase Two Deal immediately, rather than waiting until after the 2020 Election. This is an amazing deal for all. Thank you!”

Additionally, Trump is expected to cancel a 15 percent tariff that was slated for Sunday. Trump is also expected to slash duty rates that are already imposed on previous goods affected by tariffs such as clothing, flat panel TVs, and footwear.

The trade deal will also include new rules demanding China to be more transparent in its currency valuations with respect to the dollar. The Trump administration has already declared that China is a currency manipulator because Beijing intentionally lowers the value of the renminbi— the currency’s official name — thus making exports cheaper.

The second phase of negotiations with China will attempt to tackle systemic trade issues that U.S. companies have complained about for decades, such as Beijing’s subsidization of state-owned companies and the Chinese’ government’s constant demands that multinationals transfer technology in order to operate in China.

So far, Trump has gotten the China issue right.

The country’s not too distant past of authoritarianism should worry Western countries as China becomes more powerful on the world stage.

Tough diplomacy, trade pressure, and other forms of soft power should continue to be used to contain China’s influence.

Trump’s trade deal is a good place to start, however.

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