US-China phase one tariff deal signed and released

January 16, 2020: The US-China phase one tariff deal that was announced on December 19 has been signed and the text has been released.

The US has confirmed that it has cancelled its threatened new tariffs of $156 billion on Chinese goods, and has reduced but not removed existing tariffs on mainly industrial inputs. In return, China has cancelled its threatened new tariffs and agreed to buy more US agricultural and other exports over the next two years. China has also agreed to change its practices in the areas of intellectual property, technology transfer, financial services and currency valuation. The text provides details in all these areas, and provides for regular consultations and a dispute process involving the US Trade Representative and China’s equivalent senior trade official, but does not rule out further unilateral actions if consultations fail . 

The US government is claiming that the agreement will ensure that US exports to China increase by $100 billion per year by 2021. However, the New York Times pointed out that US tariffs will remain on $360 billion worth of Chinese imports, and China will also maintain some of its retaliatory tariffs. US Trade representative Robert Lighthizer described the US tariffs as “motivation for further negotiations.”  The US expects further concessions from China in phase two. The NYT quotes business commentators who question whether the deal has been worth the cost of tariffs paid by US business and consumers, and the global economic uncertainty caused by the tariff wars.

Others have noted that the deal is a truce rather than an end to the wars, and that China's commitments to buy more from the US will cause collateral damage because they will buy less from Australia and other countries. The temporary de-escalation of tariff wars is welcome, as they undermine the multilateral trading system and have already had a negative impact on global economic growth. AFTINET rejects the strategy of unilateral tariffs which the US has also imposed on Europe, Canada and others, and supports a fairer multilateral trade system based on human rights and environmental sustainability.