On December 1, President Trump and President Xi reached agreement on the margins of the G20 in Buenos Aires to delay an increase on the third, $200 billion tranche of Section 301-related tariffs from 10% to 25%, which was originally set to take place January 1. According to the White House, the two sides will now begin a 90-day period of talks to resolve “structural” issues around IP theft, non-tariff barriers, and forced technology transfer. The White House said the tariff increase would be implemented at the end of the 90-day period if no agreement is reached.
According to the White House, China has also agreed to “purchase a not yet agreed upon, but very substantial amount of agricultural, energy, industrial and other product from the United States to reduce the trade imbalance.” Soybeans, other agricultural products, and energy products were reportedly included. China has not yet indicated whether this commitment will take the form of a policy change (such as a reduction in retaliatory tariffs on U.S. agriculture exports) or whether it will be left up to private-sector entities (as when EU Commission President Jean-Claude Juncker committed to purchasing U.S. soybeans as part of its agreement last July).
Following the meeting, President Trump said China also agreed to reduce 40% tariffs (25% of which is retaliation for U.S. tariffs) on U.S. automobile exports, though China has not confirmed that it will do so.
The latest agreement is a small, but positive step toward repairing the U.S.-China trade relationship. It likely postpones the risk of a fourth tranche of tariffs on another $267 billion in Chinese imports, which the Trump administration has previously threatened to impose, beyond the 90-day period. President Trump’s appointment of U.S. Trade Representative (USTR) Robert Lighthizer, who managed to conclude the renegotiation of NAFTA, as the lead for the 90-day talks suggests that serious negotiations will take place.—±__-
However, the gulf between what the U.S. is purportedly seeking—structural and meaningful economic reform—and what China seems currently prepared to offer remains wide. Much will depend on the Trump administration’s level of ambition. Companies with interest in China should ensure that the U.S. government is aware of opportunities to address their trade issues in China as well as the specific business risks arising from the current trade conflict (in particular any risks to U.S. jobs and economic growth).