After a long period of negotiation, Vice Minister Wang Shouwen of China’s Commerce Ministry announced on December 13, 2019 that the U.S. and China have agreed to “phase one” of an agreement to bring an end to the trade war that has disrupted global supply chains since 2018. China’s confirmation came after President Trump approved a limited deal and had suggested that an official agreement was close.
The Phase One agreement covers agriculture, intellectual property protection, tech transfers, financial markets, and currency matters, though to what degree is still to be determined at the time of this post’s publication. Chinese officials declined to offer further details on tariff reduction or farm purchases, only stating that the U.S. would reduce tariffs in phases. An advisor to President Trump stated that China will purchase $50 billion of U.S. agricultural goods and that the agreement includes a “snapback” provision that would restore the original duty rates if China fails to make the purchases.
In return, the U.S. has agreed to indefinitely suspend implementation of the List 4B tariffs that were scheduled to go into effect on December 15. The U.S. has also agreed to reduce some of its tariffs on Chinese imports. The Office of the U.S. Trade Representative (USTR) confirmed that the 25% tariffs on approximately $250 billion of Chinese goods would remain for now, but that the 15% tariffs on approximately $120 billion would be reduced to 7.5% as part of the deal.
The limited agreement between the U.S. and China does not bring an end to the trade disruptions. Most of the duties placed on Chinese imports by the U.S. are still in effect, such as the Section 301 List 1 through 3 tariffs, and the List 4A tariffs have only been reduced, not eliminated. Moreover, the threat remains that the tariffs will be increased or reimposed if China does not live up to its end of the deal. It is also unclear when a Phase Two agreement might be reached or what it would include.
We are closely monitoring this situation and will provide future updates as more facts become available. If you have any questions regarding the U.S.-China trade agreement or how it may affect your business, please contact Husch Blackwell’s International Trade and Supply Chain Team.