US and China trade agree to temporary trade war truce
U.S. President Donald Trump is claiming a victory over China in negotiations that took place on Friday, 11 October at the White House, during which he agreed to postpone pending tariff increases on some Chinese goods in exchange for China agreeing to purchase more American agricultural products.
The deal would freeze a planned U.S. five percent tariff increase on USD 250 billion (EUR 226.6 billion) worth of Chinese goods, moving the effective tariff rate from 25 percent to 30 percent on a range of items, including some seafood. That round of tariffs was scheduled to go into effect Tuesday, 15 October.
However, the so-called “Phase One” deal has not yet been signed, though Trump said that could happen at a November meeting with Chinese President Xi Jinping, according to The Hill. And the agreement doesn’t touch on a separate round of tariff increases on an additional USD 160 billion (EUR 145 billion) in Chinese goods scheduled to go into effect in mid-December.
Scott Kennedy, a China analyst at the Center for Strategic and International Studies, called Friday’s announcement “the invisible deal."
"The only thing that happened Friday was that the U.S. delayed the tariff increase,” Kennedy told The Associated Press.
Yelena Shulyatyeva, a senior economic analyst for Bloomberg, said Friday’s announcement didn’t move her to shift in her outlook on the Sino-U.S. trade war.
“Past experience is that U.S.–China trade agreements aren’t worth the paper they are written on, and this one hasn’t even been written down,” she said. “For now, though, indications on trade are a little more positive. If that persists, it could help put a floor under sliding global growth.”
According to the U.S. Census Bureau, September’s trade data shows both countries have suffered economically as a result of the trade war. China’s exports to the U.S. fell 21.9 percent year-over-year, while U.S. exports to China dropped 15.7 percent. Year-to-date in 2019, the U.S. has exported USD 80.2 billion (EUR 72.8 billion) worth of goods to China – down from USD 120.2 billion (EUR ) from the same time period in 2018 – and imported USD 301.7 billion (EUR 273.8 billion) worth of Chinese goods, down from USD 539.7 billion (EUR 489.8 billion).
“The U.S. economy is showing strains in a lot of different factors. The one thing that’s still hanging in there is the consumer,” Beacon Policy Advisors Managing Partner Stephen Myrow told The Hill. “But the more you expand the tariffs, you’re going to finally start digging in hard on the consumer.”
Photo courtesy of The White House