The Phase One agreement marks a ceasefire in the long-running trade war.
Topline: President Donald Trump and Chinese Vice Premier Liu He signed the long-awaited Phase One trade deal in an elaborate ceremony at the White House on Wednesday, marking a ceasefire in the 19-month long U.S.-China trade war and boosting the stock market to new record highs.
- Trump touted the deal to reporters in his opening comments, calling it “historic,” a “landmark agreement” and a “momentous step” toward fair and reciprocal trade.
- The stock market soared on the news, with all three major indexes rising to new record highs: The S&P 500 was up 0.20%, the Dow by 0.37% and the Nasdaq by 0.23%.
- The deal includes agreements on intellectual property protection, forced technology transfer and currency rules, along with a major pledge from China to buy at least $200 billion of U.S. exports over two years, including a $16 billion a year increase in Chinese purchases of U.S. agriculture products.
- While Trump lauded the deal, market experts have expressed some skepticism: There are some decent-size numbers in terms of agricultural purchases—and that’s one sector that should benefit from this—but overall we’ll see more of a return to pre-trade-war levels of Chinese purchases rather than significant new markets,” Charlie Bobrinskoy, head of Ariel Investments, told Forbes on Tuesday.
- A significant portion of tariffs—25% on some $250 billion worth of Chinese imports—will also remain in effect, at least until a Phase Two agreement is reached, Treasury Secretary Steven Mnuchin said earlier on Wednesday.
- While the goals for increased Chinese purchases of U.S. goods have been met with some skepticism on Wall Street, Trump said that there was “total and full enforceability” on the pledges made in the deal: If China doesn’t uphold commitments, for example, the U.S. can unilaterally reimpose tariffs.
Crucial quote: “We’re going to be starting Phase Two as soon as this kicks in,” Trump told reporters during the ceremony. He also confirmed that the remaining China tariffs will stay in effect until Phase Two, explaining: “I’m leaving them on because otherwise we have no cards to negotiate with—and negotiating with Liu is very tough.”
Tangent: Democratic 2020 presidential candidate Joe Biden blasted the deal, saying that it crucially “won’t actually resolve the real issues at the heart of the dispute.” The former vice president told Forbes in a statement: “China is the big winner of Trump’s ‘phase-one’ trade deal with Beijing… True to form, Trump is getting precious little in return for the significant pain and uncertainty he has imposed on our economy, farmers, and workers.”
“I believe that under our guidance, China-U.S. relations will deliver more results and bring greater benefits to our peoples in the year ahead,” President Xi Jinping wrote in a letter to Trump, which was read aloud at the ceremony.
What to watch for: Some reporters present at the trade deal ceremony, however, highlighted that Trump appeared to be dragging it out, potentially to divert public attention from the ongoing vote on the impeachment resolution: “They have a hoax going on over there,” he said of the proceedings.
Further reading: Most China Tariffs Will Remain In Effect Until ‘Phase Two’ Trade Deal: Mnuchin
China Pledges To Buy $200 Billion Of American Goods Under Phase One Trade Deal