President Donald Trump has signed off on a mini-trade deal with China, four people familiar with the negotiations said on Thursday, marking another trade victory he can tout as he faces impeachment led by House Democrats.
A final deal will be announced on Friday, said one of the people directly briefed on the agreement.
The tentative agreement, which Trump refers to as a “phase one” deal, codifies what was agreed to in principle in October. It will require China to significantly increase its purchases of U.S. agricultural goods, open its financial services sector and enact new protections against intellectual property theft.
In exchange, Trump will cancel a 15 percent tariff that was scheduled for Sunday, people briefed on the matter said. The president is also expected to reduce duty rates already in place on a portion of the previous goods hit by tariffs, including many consumer items such as footwear, clothing and flat panel TVs.
The move would add to another 2020 campaign-boosting trade accomplishment Trump achieved this week: a deal with House Democrats on a new pact to replace the North American Free Trade Agreement.
Any China announcement would also cap a week of other political wins, ranging from House passage of a defense spending bill that included creation of the Space Force and an executive order to combat anti-Semitism.
Three people briefed on the talks said Trump was partially swayed to close a deal by a Chinese offer to purchase $200 billion worth of U.S. goods and services over a period of two years. That includes a meeting a demand to boost imports of U.S. farm goods to $50 billion within the same period.
China would also agree to buy more U.S. energy and manufactured products as well as services. China is a crucial export market for the U.S., ranking third after Canada and Mexico. The U.S. had made a demand that China reduce its trade surplus by $200 billion as far back as May 2018.
The final deal will restore some language from a deal almost reached last May, including a provision that would give the U.S. the right to enforce Chinese commitments to stop intellectual property theft, said one person briefed on the deal.
“It was not an acrimonious process,” said the person.
The text of the agreement could be formally signed on Friday by China's envoy to Washington, Cui Tiankai, said another person briefed on internal discussions.
Trump has previously said this deal would cover 60 percent of the outstanding issues the U.S. has with China, though details on what that means have been scant. It also may be difficult for the president to achieve any additional concessions from China in the coming months as his focus shifts to his 2020 reelection campaign.
The White House and U.S. Trade Representative’s office did not respond to a request for comment.
Trump telegraphed on Thursday morning that a mini deal with China was coming, a move that boosted the stock market. He tweeted that the administration is getting “VERY close to a BIG DEAL with China. They want it, and so do we!”
The president's tit-for-tat tariff fight has pummeled Chinese demand for U.S. soybeans and pork in what has been the largest export destination for American agricultural producers. Any protracted trade war could lead struggling farmers to punish the president in November.
Trump has emphasized elements of deal in an effort to placate his agricultural base, emphasizing China’s commitment to buy more agricultural goods than it had before. But the deal would require China to nearly double its agricultural purchases, and potentially require farmers to cut back on exports to other vital international markets in order to feed China.
The Trump administration changed strategy over the summer, after talks broke down in May and Trump responded with new waves of tariffs. Trade officials decided to take a more staged approach giving Trump a win on agriculture, which he wanted most in an initial deal.
The mini-deal is also expected to contain some new provisions that may be a boon for U.S. farmers battered by the trade war, flooding and disasters. Those include China giving up restrictions on growth hormones for beef and easing an approval process for genetically modified crops.
Before the tariff war, the value of U.S. agricultural exports to China in 2017 reached almost $20 billion. In 2018, that number dipped to $9.3 billion.
A tariff-rate cut on at least one set of goods hit by duties would allow the administration to avoid creating lists of winners and losers that would result from exempting specific categories of products from the tariffs, the people briefed on the deal said.
China has also made concessions to remove foreign ownership limits in the financial services sector and adopt new protections for copyrights and trademarks. Those actions reflect commitments Beijing made years prior but have failed to fully implement, business sources have said.
The deal is also expected to include new rules requiring China to be more transparent on how it values its currency compared to the dollar. The administration has already labeled China a currency manipulator, accusing Beijing of intentionally lowering the value of the renminbi, the official name for the currency, to help make its exports cheaper.
An enforcement process is expected to be agreed to, allowing the U.S. to reimpose all the tariffs that will be rolled back. China has failed to follow through on promises it made to the Obama administration.
Trump has said a second phase of negotiations would attempt to address the systemic trade concerns that U.S. industry has complained about for decades, such as Beijing’s subsidies of state-owned companies and forcing multinationals to transfer technology in order to do business in China.
Senate Democrats warned Trump on Thursday that a deal must go beyond reducing the trade deficit with China, which the president has been fixated on.
“Failure to secure commitments from the Chinese government to enact substantive, enforceable, and permanent structural reform will jeopardize American jobs and long-term economic prosperity,” Sens. Chuck Schumer, Ron Wyden (D-Ore.) and Sherrod Brown (D-Ohio) wrote in a letter on Thursday.
Some GOP lawmakers are also complaining the partial deal doesn’t address some of Beijing's more egregious trade practices that prompted the trade war.
"It doesn't matter. One China deal isn't going to solve our problems with China," said Sen. Marco Rubio (R-Fla.). "It may get us through some short-term friction but we have big systemic problem with trade with China."
Sen. Rob Portman (R-Ohio), who served as President George W. Bush's trade chief, acknowledged that a phase one deal wouldn’t “be everything.”
“It least it would be a step forward on agriculture and some structural issues," he said.
U.S. businesses view a preliminary deal as a welcome development after months of market whiplash caused by the tariff fight.
“There are still significant structural issues to work through,” said Myron Brilliant, executive vice president at the U.S. Chamber of Commerce. “But bringing some certainty and stability to the U.S.-China relationship is not only good for both countries, but good for the global economy and we're pleased with the sense that there'll be a deal announced soon.”
Daniel Lippman and Doug Palmer contributed to this report.
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U.S., China strike partial trade deal that cuts tariffs - POLITICO
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