On December 13, 2019, the United States Trade Representative (USTR) announced a “Phase One” agreement with China that will cease the imposition of 15% tariffs on $160 billion worth of Chinese imports that were scheduled to be imposed on December 15. According to a statement published by USTR, the U.S. will maintain tariffs on approximately $250 billion of Chinese goods (i.e. Lists 1 through 3), while lowering tariffs to 7.5% on approximately $120 billion of Chinese goods (i.e. List 4a).
In return, China has cancelled its retaliatory tariffs that it had planned for December 15, including a 25% tariff on U.S. autos, and agreed to increase purchases of U.S. agricultural goods, manufactured goods, energy, and services by at least $200 billion over the next two years. For perspective, China bought approximately $186 billion in goods and services from the U.S. in 2017 before the “trade war” with China began. In addition to increasing agricultural purchase targets, China has committed to reducing non-tariff barriers for products such as poultry and seafood.
The official text of the 86 page agreement has not formally been released. However the broad outline of the deal details commitments in areas such as intellectual property, currency manipulation, and enforcement. For intellectual property, China has pledged increasing protection for patents and trademarks, while also following through on previous commitments to curb technology transfers and providing financial assistance to outward investment purposed to acquire U.S. technology in certain key sectors outlined in the “China 2025” industrial plan. The currency manipulation language in the deal protects the U.S. against what it calls “competitive currency devaluations” and promotes transparency. As for enforcement, the U.S. and China came to agreement on a regular bilateral consultation process before enacting new tariffs or other penalties.
United States Trade Representative Robert Lighthizer touted the agreement in his official press statement: “President Trump has focused on concluding a Phase One agreement that achieves meaningful, fully-enforceable structural changes and begins rebalancing the U.S.-China trade relationship.”