Logo of Phnom Penh Post newspaper Phnom Penh Post - Washington, Beijing set to sign vital trade truce

Washington, Beijing set to sign vital trade truce

Content image - Phnom Penh Post
The US and China are set to sign a trade truce on Wednesday. LI XUEREN/XINHUA NEWS AGENCY

Washington, Beijing set to sign vital trade truce

The world’s two dominant economic powers, the US and China, are poised to sign a trade truce on Wednesday that will allow businesses around the globe to breathe a sigh of relief.

Although tariffs on hundreds of billions of dollars of two-way trade will remain in place, likely at least until after US President Donald Trump faces re-election in November, some of the uncertainty will go away.

And just as he is about to face an impeachment trial in the US Senate, Trump will be able to crow about a victory with his “phase one” agreement that includes pledges from China to beef up purchases of US crops and products, at least in the short term.

That has boosted stock markets worldwide in recent days, as it takes the threat of new tariffs off the table for now.

“He’s delivering on all his promises, and he is building a great economy for American companies and American workers,” Treasury Secretary Steven Mnuchin said late on Tuesday on the eve of the signing.

“I think phase one is an enormous step in the right direction,” he said in an interview on the Fox Business network.

However, the most difficult issues remain to be dealt with in “phase two” negotiations, including massive subsidies for state industry and forced technology transfer.

And even the achievements in the deal take the relationship back to where it was before Trump took office, restoring elements he scrapped.

AWhither tariffs?

“The US-China phase-one deal is essentially a trade truce, with large state-directed purchases attached. The truce is good news for the US and the world economy,” economist Mary Lovely said in an analysis.

Still, the trade expert with the Peterson Institute for International Economics, cautioned that “we will continue to see the impact of this in slower investment and higher business costs”.

US officials have said they will release details of the agreement set to be signed at a White House ceremony on Wednesday.

After announcing the deal December 13, the US cancelled a damaging round of new tariffs that were due to kick in December 15, and promised to slash in half the 15 per cent tariffs on $120 billion imposed September 1, on consumer goods like clothing.

Mnuchin dismissed a Bloomberg report that the initial agreement could include provisions to roll back more tariffs on China after the election.

“The tariffs will stay in place until there is a phase two. If the president gets phase two quickly, he will consider releasing tariffs. If not, there won’t be any tariff relief,” Mnuchin said on Bloomberg TV.

“It has nothing to do with the election or anything else.”

What’s in a deal?

Washington said Beijing agreed to import, over two years, $200 billion of US products above the levels in 2017, before Trump launched his offensive.

Trump has repeatedly touted the trade pact as a boon for US farmers, saying China will buy between $40 and $50 billion in agricultural goods.

US farmers were hit hard by the tariff war – notably on soybeans which saw exports to China plunge to just $3 billion from more than $12 billion in 2017. The Trump administration paid out $28 billion in aid to farmers in the last two years.

But many economists question whether they have the capacity to meet that demand.

And Lovely raised a question about the wisdom on relying so heavily on the Chinese market.

“It also means Chinese retaliation could be reinstated, dampening farmers’ willingness to invest to meet the very hard export targets in the deal.”

US and Chinese officials say the agreement includes protections for intellectual property, and addresses financial services and foreign exchange while including a provision for dispute resolution, which Mnuchin said will be binding for the first time.

Trump in August formally accused China of manipulating its currency to gain an advantage in trade and offset the impact of the tariffs.

The label was removed earlier this week.

The deal also restores a twice-yearly dialogue process that previous administrations conducted regularly but that Trump scrapped.

MOST VIEWED

  • Website advises travellers to stay clear of Angkor Wat

    An Australian website has advised travellers to avoid Angkor Wat during their trip to Southeast Asia because the ancient temple is showing signs of rapid erosion and faced water management issues. In a recent article entitled Best places to go in 2020: 12 destinations you should avoid

  • Passenger taxi boat ridership sinks despite free services

    Passenger taxi boat traffic has dropped by about five per cent compared to the same period last year, despite the government providing free service for garment workers until next year, Phnom Penh Autonomous Bus Transportation Authority director Ean Sokhim said on Monday. In 2018, the Phnom

  • Shipments of mango to South Korea poised to begin this week

    Exports of Cambodian mangoes to South Korea will begin this week after Korean authorities gave the nod. The Ministry of Agriculture, Forestry and Fisheries’ Department of Plant Protection, Sanitary and Phytosanitary Requirements director Ker Monthivuth told The Post on Sunday that after several inspections of

  • First deportees of the year touch down in Cambodia

    Twenty-five Cambodian-Americans landed in Phnom Penh on Wednesday, marking the first such deportations of the year. “On Wednesday, US law enforcement authorities deported 25 Cambodian nationals that immigration judges determined had no legal basis to remain in the US,” said Arend Zwartjes, spokesperson for the US

  • Kingdom drafting new law to strengthen immigration

    The Ministry of Interior on Tuesday said it had formed a working group to draft amendments to the Law on Immigration. Its secretary of state Sok Phal told The Post that the amendments will strengthen the management of immigrants in line with the current situation.

  • Jica seeks to turn PP, towns into smart cities

    Japanese International Cooperation Agency (Jica) representatives have sought support from Siem Reap’s Apsara National Authority (ANA) to transform the ancient capital into a smart city. The call was made in February last year after the government approved three cities to join the Asean Smart