by Martin on December 16, 2019

The “phase one” trade deal to double the U.S. exports to China: Lighthizer

As the new “phase one” informal trade agreement between the U.S. and China has been closed, the two parties are hopeful that their economic relations will be resolved. According to the U.S. Trade Representative Robert Lighthizer, the new development will nearly double the U.S. exports to China.

“Phase one” implies that there is still work to be done to make things work between the economically belligerent countries; speaking on CBS’ “Face the Nation“, Lighthizer admitted that the text of the agreement itself, as well as some specific terms, still require a further explanation. However, he also adds that the overall deal is “totally done” and it’s definite progress in several years.

Deteriorated relations

The U.S.-China trade relations have long been a subject for criticism in Trump’s campaign – both pre-election and post-election. He constantly stressed the fact that China subsidized its national production, neglected foreign companies’ intellectual property rights, and limited the U.S. exports on its territory.

That’s why he initiated his trade limitation campaign in 2017 that saw a couple-hundred-billion Chinese exports restricted with the tariffs. Currently, Trump has imposed tariffs on some $360 billion worth of Chinese exports.

Recently, the U.S. President’s Administration was preparing to introduce a new set of tariffs on an additional $160 billion Chinese goods, including tech production, clothing, toys, etc. There was even a deadline set for December 15.

“Phase one”

However, the December 12 negotiations between the two parties resulted in a fruitful outcome, setting a precedent of cooperation in a two-and-a-half-year-period of belligerence. The agreement was officially announced the next day and the U.S. officials are hopeful for its results.

As the Lighthizer claims, “phase one” is going to double the U.S. exports to China in a two-year period. It includes the U.S. agricultural, energy, and manufactured products worth some 200 billion US dollars. More specifically, the U.S. agricultural production is expected to increase by $40-50 billion a year in the next two years, with the respective increase in other fields as well.

Plus, China has also pledged to protect U.S. intellectual property and not force companies to disclose their major secrets.

While China has agreed on these concessions, it expects the same from the U.S. as well: alongside the announcement of the deal, it was also mentioned that the US tariffs on some Chinese export will be reduced.

After the announcement of “phase one”, the Asian market opened with a success. The Monday shares rose to their eight-month high, excluding Japan. However, the capital gains were somewhat curbed due to further uncertainties in the talks.

“Phase two” is necessary

As it turns out, the U.S. seems more enthusiastic about the deal than China. Some Chinese officials admitted that while “phase one” is certainly a big achievement, things aren’t done yet and if something goes South, the country will withdraw from the agreement.

But this is more or less expected in the context of deteriorated trade relations that have been going on for more than two and a half years. Everything in that agreement has to be put in order, with every word and term explained, not leaving any grey areas. Only this way will the new deal have overwhelming support from both countries.

By Martin

Martin has been a Trader for 5 years now. He has experience in trading Forex, stocks, and cryptocurrencies. Aside from his trading career, he also worked for a UK news outlet as a web article writer and interviewer for 3 years. His insight on news and brokers have been refining for the past 4 years.

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