Phase one of US-China trade deal to repeal certain tariffs: Report

December 16, 2019 TH Author

The United States and China have agreed to the first phase of a trade deal that, once signed, would see some US tariffs be reduced or repealed.

US Trade Representative Robert Lighthizer, speaking to CBS on Face the Nation, said that while there are still some “scrubs”, the deal is “totally done, absolutely”.

Phase one of the trade deal will see some US tariffs on Chinese goods be reduced or repealed in exchange for China increasing its expenditure on US agricultural, manufactured, and energy products by at least $200 billion over the next two years.

Among the tariffs to be affected are the December 15 tariffs against China, which will be completely rolled back as part of the deal.

Products that were set to be hit by the December 15 tariffs included cell phones, laptop computers, video game consoles, certain toys, computer monitors, and certain items of footwear and clothing. With the rolling back of these tariffs however, US consumers will now avoid having to pay an extra 10% for these products.

“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,” Trump tweeted over the weekend.

“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,” he added.

The deal comes off the back of over two and a half years’ worth of escalating tensions between the United States and China, which saw the rollout of various tariffs.

The process of putting tariffs in place kicked off in March last year, with Trump stating at the time that an investigation by Lighthizer had concluded China was using foreign ownership restrictions to require technology transfers from US companies to Chinese organisations, as well as conducting espionage to acquire intellectual property and confidential business information.

By June last year, the United States and China had both levied tit-for-tat tariffs on $34 billion worth of goods. The United States in August then laid out plans to introduce tariffs on $300 billion worth of Chinese imports over two tranches.

Trump then further increased existing tariffs on $250 billion worth of Chinese imports from 25% to 30% after the Chinese finance ministry enforced additional tariffs of 10% and 5%, respectively, on $75 billion worth of US goods in two batches that were to start on September 1 and December 15.

While a trade deal has been agreed upon, Lighthizer told CBS that the success of the deal will be dependent on whether China follows through on its part of the agreement.

“Ultimately, whether this whole agreement works is going to be determined by who’s making the decisions in China, not in the United States,” Lighthizer said. “If the hard-liners are making the decisions we’re going to get one outcome, if the reformers are making the decisions, which is what we hope, then we’re going to get another outcome.”

To ensure that China keeps its commitments, Lighthizer said the US government would periodically review China’s actions. If China violates the terms of the agreement, the United States would “take a proportionate reaction” such as potentially bringing back any of the tariffs that are set to be reduced or repealed.

Lighthizer also added that phase one of the deal would not solve all of the problems between the United States and China as integration between the two nations would “take years”.

Phase one of the trade deal is expected to be signed in early January.

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