Four key parts of Trump’s China trade deal

President Trump and Chinese officials took a crucial step toward resolving the nearly two-year trade war between the world’s largest economies by signing a long-sought preliminary trade deal on Wednesday.

The so-called Phase One trade deal covers almost every corner of the U.S. and China’s complicated trading relationship, from agricultural imports and dairy quality standards to financial market access and intellectual property.

Trump and his GOP allies have billed the agreement as a massive victory for the president and vindication for the damaging tariffs he imposed on Chinese goods.

Trump’s critics and trade experts counter that the deal sets potentially unattainable targets and could easily be skirted by China.

China has a track record of shirking international trade commitments and Trump has not hesitated to retaliate against Beijing when he feels slighted.

If both sides can uphold the Phase One agreement, here’s what you can expect to see.

China commits to buy more U.S. crops, products

Trump has long been obsessed with the vast gulf between the value of goods the U.S. imports from China and the value of U.S. products imported by Beijing. That difference, known as the trade deficit, represents the U.S. reliance on cheap consumer goods from China. 

While economists say trade deficits are not necessarily bad, Trump equates the U.S. deficit with China to Beijing ripping off Americans.

To narrow that gap, China agreed to increase purchases of U.S. goods and services by $200 billion over the next two years, including $77.7 billion for manufactured goods and $32 billion for agricultural products.

“The farmers are really happy with the new China Trade Deal and the soon to be signed deal with Mexico and Canada,” Trump tweeted Thursday, “but I hope the thing they will most remember is the fact that I was able to take massive incoming Tariff money and use it to help them get through the tough times!”

China to crack down on patent theft, forced technology transfers

China’s alleged record of stealing intellectual property (IP) and pinching crucial technology from U.S. companies was one of the few major structural issues addressed in Phase One.

Beijing has agreed to expand its laws and increase penalties for IP theft and to participate in a conflict resolution process to settle allegations levied by U.S. firms.

China also agreed to bar domestic companies from forcing U.S. firms to transfer valuable or sensitive technology to Chinese business partners in order to operate within the country. 

Both areas were prime concerns for U.S. businesses and trade groups representing corporations and technology companies. 

U.S., China declare truce on exchange rate, interest rate battles

Trump has long accused China of suppressing the value of its currency and flooding its economy with stimulus to make U.S. products relatively more expensive in foreign markets.

The president has tried to bully the Federal Reserve into slashing interest rates further to weaken the dollar, but the independent central bank has refused to yield.

Trump followed through on his campaign promise to label China a currency manipulator in August after China had allowed its yuan to drop below a seven-to-one exchange rate with the dollar.

Tensions eased after China boosted the value of the yuan and Trump revoked the label shortly before signing the new deal with China.

The Phase One agreement bars both the U.S. and China from targeting foreign exchange rates or manipulating interest rates to devalue their own currencies and orders each country to follow International Monetary Fund rules on macroeconomic policy.

China opens financial markets to U.S. firms

The preliminary trade deal sets in writing several commitments China has made to ease foreign access to financial markets and domestic commerce. 

Under the agreement, China has committed to allow investment firms, asset management companies and insurance companies owned wholly by foreign countries to operate in the country by April 1.

Beijing also agreed to remove discriminatory regulations and reviews for U.S. firms that limit bond rating and investment services offerings in the country.

Tags Donald Trump

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