The United States and China have agreed upon their “phase one” trade agreement after months of comprehensive and heated rounds of negotiations.
China has committed to purchase U.S. $200 billion worth of agricultural, auto, manufacturing, and aviation products from the U.S. as part of the 86-page agreement.
In an exclusive revelation by Politico and the South China Morning Post, the target for manufacturing goods will have the largest share, comprising a whopping U.S. $75 billion.
China has additionally promised to buy U.S. $50 billion worth of energy, U.S. $40 billion in agriculture, and up to U.S. $40 billion in services.
In return, Washington has lifted China from its list of currency manipulators, as well as halving tariffs from 15 per cent to 7.5 per cent on U.S. $120 billion worth of Chinese products.
Nevertheless, 25 per cent tariffs on U.S. $250 billion worth of products would remain in place.
U.S. exports are expected to increase as a result of the trade agreement, with the total exports to China reaching U.S. $260 billion in 2020, and approximately U.S. $310 billion in 2021.
On Wednesday (January 15), Beijing has reaffirmed its commitment in technology transfer, where it would not coerce American corporations to turn in their respective mergers and acquisitions (M&A) technology so as to be able to access its markets.
Intellectual property protections would also be fortified by China, enabling U.S. businesses easier to sue for theft in civil and criminal proceedings within its jurisdiction.
Pledges have also been made to further open up and liberalise the Chinese financial services sector, ranging from assets management to banking services and credit ratings.
The U.S. reciprocally will allow some Chinese financial services to receive non-discriminatory regulatory treatment in the U.S.
Asian and European markets had mixed reactions on Thursday whereas American stocks continued to surge.
Hong Kong’s Hang Seng Index rose slightly by 0.11 per cent but Shanghai’s S.S.E. Composite Index and Shenzhen’s S.Z.S.E. Component Index fell by 0.52 per cent and 0.15 per cent respectively.
F.T.S.E. 100 and F.T.S.E. 250 remained sluggish throughout the day whilst S&P 500 added 0.56 per cent to over 3,300 for the first time. Dow Jones was up by 0.57 per cent and Nasdaq by 0.61 per cent.
Shortly after signing the first phase of a new trade agreement with China, U.S. President Donald Trump triumphantly described the deal as “the biggest deal anybody has seen”.
“Today, we are taking a momentous step towards a future of fair and reciprocal trade,” the president continued, “Together we are righting the wrong of the past.
“At long last Americans have a government that puts them first at the negotiating table.”
China, on the other hand, was left battered with a humbling speech delivered by Liu He, China’s Vice Premier and chief negotiator.
Vice Premier Liu said the trade deal was good for both the U.S. and China, and “conducive to world peace and prosperity”.
Global Times, the jingoistic state-run propaganda outlet, said in its editorial that the trade deal would leave both countries with “regret” and “unhappiness”. “Arguing who lost and who won is superficial,” it added.
Similarly, the state broadcaster C.C.T.V. called the agreement as “boosting people’s confidence” as the U.S.-China trade war has paused, albeit temporarily.
Such commentary are in stark contrast to Beijing’s previous determination in vowing to “fight till the very end” in standing up for its interests.