President Trump said Friday that the United States and China have “agreed in principle” on a preliminary trade deal, marking the first tangible achievement in their 18-month trade war while leaving all of the toughest issues that divide them to future talks.
Speaking in the Oval Office during a meeting with Chinese Vice Premier Liu He, the president said negotiators reached a “substantial phase one” pact, though details were scarce . As part of the initial agreement, the White House agreed not to proceed with plans to increase tariffs on $250 billion in Chinese goods next week to 30 percent from 25 percent.
“We’ve had nothing but bad news since April. Finally, there’s some sunlight on these trade talks," said Myron Brilliant, executive vice president of the U.S. Chamber of Commerce.
Trump said the partial accord includes Chinese purchases of $40 billion to $50 billion in U.S. farm products and U.S. tariff concessions, though he has in the past promised trade talk breakthroughs that did not materialize. Friday’s announcement was intended to pave the way for a more complete bargain between Washington and Beijing in the yet-to-be-defined second and third phases. Trump said negotiators had agreed on unspecified provisions governing intellectual property, the opening of China’s financial services market and a ban on using currency as a trade weapon.
But no formal terms were committed to paper, and the Office of the U.S. Trade Representative did not make public any additional details. “I don’t think it should be a problem, getting it papered,” the president said, adding that he expected that to occur over the next four weeks.
Trump and Chinese President Xi Jinping could meet to sign the agreement in Chile at an Asian-Pacific leaders summit in mid-November. “Both presidents have to own this thing,” said Craig Allen, president of the U.S.-China Business Council.
News of a potential deal, which capped two days of talks in Washington, cheered Wall Street earlier Friday. Even before the president spoke, the Dow Jones industrial average was up roughly 500 points, or close to 2 percent, amid hints that a partial accord was imminent. The president celebrated the outcome as “one of the biggest deals,” but the lack of specificity in his announcement, and his comment that the partial deal could take weeks to iron out, cooled traders’ optimism. The Dow closed up almost 320 points, or 1.2 percent, to finish at 26,816.59.
“This deal temporarily puts off any further escalation of tensions but does not resolve any of the major underlying sources of frictions between the two countries or mitigate uncertainty about the future of the bilateral economic relationship,” said Eswar Prasad, former head of the International Monetary Fund’s China unit.
Some China hawks also were unimpressed.
“It’s basically some purchases and a bunch of fluff because no one in the administration really wants to go through with the tariffs anyway,” said Derek Scissors, a China expert at the American Enterprise Institute.
Trump has yet to decide whether to proceed with another planned tariff increase Dec. 15, which would hit popular consumer goods just as his re-election effort swings into high gear.
The president’s decision to accept a multipart process came just three weeks after he flatly rejected the notion of a partial deal, insisting “we’re looking for the big deal.”
The shift comes as Trump faces mounting unrest among core supporters in Midwest farm and manufacturing communities. Voters who have backed his confrontational stance toward China from the start have grown impatient as farm export losses piled up and factory orders softened. His ability to lock up support in states such as Wisconsin, Michigan, Pennsylvania and Ohio could be crucial to his reelection bid.
Business and farm representatives generally welcomed Friday’s announcement, but called it insufficient.
“This agreement seemingly does nothing to address the crippling tariffs farmers currently face. The promise of additional ag purchases is welcome news but details on timeline, price, commodities and many other questions will have to be answered,” said Brian Kuehl, of Farmers For Free Trade.
But Trump supporters glimpsed signs that the president’s aggressive approach is paying off.
“It appears that China is starting to recognize the gravity of the situation, and is finally addressing some long-standing U.S. concerns — such as protection of intellectual property and market access for American farmers,” said Stephen Vaughn, a former administration trade official now at King & Spalding. “At the same time, President Trump and his team are still focused on the major, structural concerns that have driven the Administration’s efforts toward China from the beginning.”
Trump’s Oval Office event was just the latest twist in a negotiating saga that began at the Group of 20 summit in Buenos Aires last year. Over a steak dinner with Xi, Trump agreed to delay a planned Jan. 1 tariff increase while the two sides sprinted for a deal in 90 days.
That effort ultimately produced multiple negotiating rounds and tariff delays while the president touted prospects for an “epic” agreement. Talks collapsed in May with the administration blaming the Chinese for reneging on a nearly finished document.
After Trump and Xi met this summer at another summit, in Osaka, Japan, hopes for progress were temporarily raised, but they cratered quickly after the U.S. president later grew infuriated by what he saw as China’s failure to implement promised purchase of farm goods. In August, Trump abruptly set in motion plans to tax virtually every Chinese product that enters the United States.
The protracted U.S.-China trade dispute has unnerved investors, disrupted global supply chains and featured the most aggressive use of tariffs by an American president since the 1930s. Trump says his “America First” policy is designed to benefit workers who have suffered from decades of globalization and prevent China from supplanting the United States as the world’s top technology power.
Friday’s announcement leaves the toughest U.S.-China issues for future negotiations, including Trump’s demands for far-reaching structural changes in the state-directed Chinese economy. Robert E. Lighthizer, the president’s chief trade negotiator, wants China to stop forcing U.S. companies to transfer technology to Chinese companies to gain access to the Chinese market. Chinese officials deny doing that and are also resisting U.S. demands to curb subsidies for state enterprises that compete with American companies.
Trump also has yet to announce whether he will extend a license allowing Chinese telecommunications company Huawei to continue buying American parts when it expires Nov. 18.
Trump has vowed to close the persistent U.S. deficit in its trade with China. Yet the United States continues to import far more from China than it sells to Chinese customers, with last year’s gap totaling $419 billion, or 21 percent larger than before Trump took office.
The first steps include an increase in Chinese agricultural purchases, good news for American farmers who have lost billions of dollars in sales during the trade war. China recently began stepping up orders of U.S. farm products as a deal neared. But exports of U.S. soybeans to China fell from $12.2 billion in 2018 to just $3.1 billion last year, according to the U.S. Census Bureau.
Trump said the phase one deal would be “tremendous” for farmers. “They’re going to have to buy more land fast and lots of tractors,” he told reporters.
The US has agreed to suspend its next tariff hike on Chinese imports after two days of trade talks in Washington.
US President Donald Trump said negotiators had reached a "phase one deal" that would include increased agricultural purchases and address financial services and technology theft.
China's top negotiator Liu He also said he was "happy" with progress.
The US was due to raise tariffs on some Chinese goods to 30% next week.
US share markets, which had risen on reports of a deal, closed higher, but shed some gains in the final minutes of trade as it became clear any agreement was relatively limited.
'A deal, pretty much'
"We've come to a deal, pretty much, subject to getting it written," Mr Trump said, adding that negotiators would begin discussing additional phases as soon as this set of agreements is put to paper.
Mr Trump said he might sign the deal alongside Chinese President Xi Jinping at a United Nations summit in Chile in December.
The US has claimed progress in the past on similar issues, such as increased agricultural purchases and foreign exchange and currency, without the dispute being resolved.
The US has claimed progress on similar issues in the past
Another planned tariff hike, in December, remains on the table, said Robert Lighthizer, America's top trade negotiator.
Lobby group Farmers for Free Trade said the promise of increased agricultural purchases by China - to between $40bn and $50bn, according to Mr Trump - was welcome, but noted that details were scant.
"While we are pleased that tariffs aren't going up, this agreement seemingly does nothing to address the crippling tariffs farmers currently face," said Brian Kuehl, the group's co-executive director.
"From the very beginning of the trade war, farmers have been promised that their patience would be rewarded. To date, the deal they've been promised has not come."
The US and China have imposed tariffs on billions of dollars worth of each other's goods over the past 15 months, casting a pall over the global economy.
The US wants better protection for US intellectual property, and an end to both cyber theft and the forced transfer of technology to Chinese firms.
It also wants China to reduce industrial subsidies and improve access to Chinese markets for US companies.
The U.S. and China took an initial step to cement a trade agreement that had been derailed, with Washington saying on Friday it would shelve a planned increase in tariffs on goods imported from China, while Beijing would increase purchases of U.S. agricultural products.
The two sides left many details to be worked out in the weeks or months ahead on tough issues including China’s enforcement of intellectual property rules, U.S. access to Chinese markets, Chinese government support for state-owned enterprises, and the fate of U.S. tariffs on nearly $360 billion worth of Chinese imports already in place.
The Dow Jones Industrial Average finished the day higher on fresh signs of trade detente, rising 319.92 points, or 1.21%, to 26816.59, but it fell from gains of more than 500 points after details of the tentative agreement came out.
The rough framework hashed out in two days of talks between senior U.S. and Chinese officials in Washington included a Chinese agreement to purchase American farm products totaling $40 billion to $50 billion, President Trump said, without specifying over what time period that would occur.
The tentative truce underwhelmed some international businesses that had been hoping the U.S. and China would finish up a deal that cemented more sweeping structural changes in China’s economy, eliminated additional tariffs scheduled to go into place in December and even rolled back existing tariffs both sides have added to imports from each country.
The planned tariff increases in December on electronics, apparel and other imported consumer goods—a big uncertainty for many U.S. firms—haven’t been shelved so far, Mr. Trump’s trade adviser, Robert Lighthizer, said in the Oval Office.
“If this turns out to be all there is, we could have achieved these results a year ago or more,” said Derek Scissors, a trade expert at the American Enterprise Institute who has advised the Trump administration.
Friday’s announcement potentially works in Beijing’s favor, as it has long sought to negotiate with the U.S. in stages. China’s lead trade negotiator and Vice Premier Liu He has previously said that 40% of U.S. demands could be tackled immediately, while another 40% could be addressed through continued negotiations.
In the lead-up to this round of talks, Beijing sought to narrow the scope of topics that would be discussed, in order to put thornier national-security issues on a separate track. By contrast, President Trump previously said he would rather get a “whole deal” than a limited one.
Still, two days of congenial discussions did amount to a tamping down of tensions that had been increasing since talks broke down in the spring, when the U.S. said Chinese negotiators reneged on agreements that had been hashed out.
The White House said on Friday that Mr. Trump had received a goodwill letter from Chinese President Xi Jinping. “I attach great importance to your concerns on agricultural products,” Mr. Xi said, according to a translation provided by the White House. “Recently, the Chinese companies involved have accelerated purchases of American agricultural products, including soybeans and pork.”
Chinese state media said the two sides made “substantive progress” on a range of issues including agriculture, but didn’t mention potential Chinese purchases.
The two countries said they made progress on intellectual-property protection and rules to prevent currency manipulation, U.S. officials said Friday, though they declined to offer specifics. Treasury Secretary Steven Mnuchin this February claimed to have already reached a currency agreement with China and cited it as sufficient to delay an earlier round of tariffs.
Mr. Trump—facing a slowing U.S. economy and an impeachment investigation in Congress—said the progress could lead to a “substantial phase one deal” that he and Mr. Xi could sign in November at a coming summit of Asia-Pacific leaders.
The U.S. appears to be far from its original goal of getting China to overhaul its economy and is instead saving major structural issues to negotiate later.
The details of the agriculture deal are rough. If China increases purchases of U.S. agricultural goods by $40 billion to $50 billion in a year, that would mark substantial gains. In 2017, before the trade war started, China purchased about $24 billion a year of U.S. food and agricultural exports. If the promised sum is spread out over some longer period of time, it is less significant.
“This announcement of an impending deal hardly resolves any of the major underlying sources of trade and economic frictions between the two countries,” said Eswar Prasad, a China expert and an economist at Cornell University. “And from the perspective of businesses, it does not mitigate uncertainty about the future of the bilateral economic relationship.”
Mr. Trump laid out a schedule for finishing up a first phase of a deal with China in the coming weeks. Under that plan, there would be one or two subsequent phases of negotiations taking place over some unspecified period of time. Rules on safeguarding intellectual property in China are mostly done, but some will be included in phase two, he said. The coercive transfer of foreign companies’ technology in China may span phases two and three.
Farmers applauded the progress with China, which has answered U.S. tariffs with restrictions on American agricultural exports. “The promise of additional ag purchases is welcome news, but details on timeline, price, commodities and many other questions will have to be answered,” said Brian Kuehl, co-executive director of Farmers for Free Trade.
Business groups were more cautious. “We look forward to reviewing the details of this announcement and urge both governments to work toward making additional structural reforms in China and eliminating tariffs,” said the Business Roundtable, a group of large U.S. companies, in a statement.
While some hawkish politicians have warned of making concessions to Beijing, the bulk of Republican lawmakers who oppose tariffs are eager for progress in resolving the trade war. “Any time progress is made, that’s good news,” said Sen. Chuck Grassley (R., Iowa), chairman of the Senate Finance Committee. “A final deal must address the full scope of structural issues.”
Mr. Trump announced the steps after U.S. and Chinese negotiators worked this week in Washington and after the conclusion of a meeting with Mr. Liu in the White House. Mr. Liu said the discussions with senior Trump administration officials were “very good.”
Mr. Lighthizer said one sensitive bargaining chip wasn’t included in this week’s trade discussions: the easing of regulatory restrictions that have put financial pressure on Chinese telecom giant Huawei Technologies Co.
Earlier this year, the Trump administration put Huawei on an export blacklist after warning that its products could be used to spy on or disrupt telecommunications networks, which the company denies. The move put a barrier between some U.S. chip makers and other companies that sent $11 billion worth of components to Huawei last year.
On Friday, Mr. Lighthizer said Huawei’s fate is being handled as a separate process.
Prior to trade talks, some lawmakers and Washington policy experts worried that U.S. negotiators would agree to loosen restrictions on Huawei in a way that compromised the country’s national security.
On Friday’s developments, Senate Minority Leader Chuck Schumer (D., N.Y.) was pleased that the concessions weren’t included. “The good in President Trump’s ‘deal’ with China is not what’s in it—there isn’t much—but what isn’t in it: any loosening of restrictions on Huawei,” he said in a statement.
Earlier this week, the White House said it would clear licenses to enable some U.S. suppliers to resume doing business with Huawei, according to a person familiar with the decision. Officials at the Commerce Department’s Bureau of Industry and Security haven’t said when it will begin approving licenses.
Friday’s announcement shows the continuation of a recent detente in the trade war. Mr. Trump, under pressure from businesses and Republicans, previously delayed the October tariff increase by two weeks and began speaking more positively about cooperating with China.
Beijing overnight reiterated a commitment it made earlier this year to open up its financial sector by next year, with a timeline for when it would abolish limitations on foreign ownership in securities and futures in 2020.
Until this week, there had been few signs of progress in the talks since the two sides walked away from a nearly complete deal in May. At that time Messrs. Trump, Lighthizer and Mnuchin accused the Chinese side of backing away from previous commitments at the negotiating table, and Mr. Trump raised tariff levels in May and paved the way for duties on more products.
Messrs. Trump and Xi had sought to get negotiations moving again after a June meeting at the Group of 20 leading economies in Osaka, Japan. After that meeting, Mr. Trump said he had received commitments from China to buy large amounts of U.S. farm products and that he would allow U.S. firms to sell products to Huawei if the cooperation didn’t jeopardize U.S. national security. Yet the talks didn’t immediately improve, and both sides blamed each other for failing to follow through with the Huawei reprieve and agricultural purchases.
In August, China bought $945 million of soybeans, the best month since January 2018, and recently the White House moved to greenlight licenses to do business with Huawei, though the Commerce Department didn’t say it had granted them.
China hawks from both parties have warned against easing pressure on Huawei, which many lawmakers and officials see as a national security threat.
The Trump administration kicked off the conflict in 2017 when Mr. Lighthizer began investigating Chinese economic practices under a U.S. trade law known as Section 301. The probe found evidence of intellectual-property violations, coerced transfer of technology and cyberhacking for business gain, and Mr. Trump responded in March by authorizing tariffs—first on just $50 billion in mostly industrial imports from China.
Since then the tariffs footprint has expanded to include most products imported from China, including $111 billion in mostly consumer items penalized with 15% tariffs on Sept. 1. Beijing has responded with its own retaliatory tariffs on American farm products, cars and other products.
The framework discussed Friday shows how difficult it has been for the U.S. to draw long-term concessions out of Beijing, in particular changes to Chinese industrial policy and its practice of subsidizing state-owned enterprises.
At the same time, the Trump administration is paving the way for more discussions that could lead to a broad deal later. “It’s more setting the train back on the track in some ways and dealing with issues that aren’t so easy to deal with but still need to be addressed eventually,” said Claire Reade, senior counsel at Arnold Porter and former assistant U.S. trade representative for China affairs.