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U.S. and China Reach Phase One Trade Agreement

The U.S. and China have reached a preliminary agreement in their long-running trade war, President Trump and China’s Vice Minister of Commerce Wang Shouwen said in separate statements Friday.

Mr. Trump tweeted that the two sides had agreed “to a very large Phase One Deal with China,” adding that the 25% tariffs on Chinese imports would remain but that the 15% levies on other goods would be cut in half.

A new round of tariffs slated to take effect on Sunday will not go into effect, Mr. Trump said, citing Friday’s agreement, adding that the two countries would immediately begin negotiations on more contentious issues.

“This is an amazing deal for all. Thank you!” he tweeted.

In Beijing, Mr. Wang said only that the U.S. would remove its tariffs in stages, declining to disclose details on the scale of the tariff reduction or of its purchases of U.S. farm products.

Mr. Wang said that the agreement would cover a range of contentious issues, including agriculture, intellectual property protection, technology transfer and liberalization of the financial sector, without elaborating.

Chinese President Xi Jinping has staked his credibility and popularity in large part on his image as someone willing and able to stand up to foreign pressure.


Photo:

Neil Celis, Press Pool

Mr. Trump, in his tweet, also mentioned energy and manufactured goods, “plus much more,” without offering further details.

Mr. Wang said that the deal would need to first go through “legal procedures” in both countries before it is signed.

In Washington, U.S. Trade Representative

Robert Lighthizer

said the deal “achieves meaningful, fully-enforceable structural changes and begins rebalancing the U.S.-China trade relationship.”

“This unprecedented agreement accomplishes those very significant goals and would not have been possible without the President’s strong leadership,” Mr. Lighthizer said.

Mr. Trump on Thursday approved a so-called phase-one pact scaling back tariffs on Chinese imports and eliminating the new levies in exchange for a written pledge from Beijing to buy tens of billions of dollars worth of U.S. farm products, among other concessions.

At an earlier news briefing, Foreign Ministry spokeswoman Hua Chunying had referred only to how news of the agreement helped fuel a surge in U.S. and European stocks, but didn’t confirm the existence of a deal.

Mr. Trump is vulnerable to criticism from China hawks who have advocated a hardened stance toward Beijing. Chinese President

Xi Jinping,

meanwhile, faces an increasingly tricky balancing act of his own, as he seeks to stabilize a wobbly bilateral relationship without appearing to give in to U.S. pressure.

Beijing is giving Washington a concession in the trade talks: regulations that would level the playing field for foreign companies in China. But there are doubts about Beijing’s true commitment to opening its market. Photo: Johannes Eisele/AFP via Getty Images

Ensuring what senior leaders have described as a “balanced” agreement has been a priority for Chinese negotiators throughout the process. Beijing walked away from a nearly completed deal in early May because the leadership felt that the text of the agreement was too lopsided in Washington’s favor. That led the Trump administration to ramp up its trade war with China, putting a drag on the world economy.

Though Beijing sees the benefit in wrapping up a deal as quickly as possible this time around, it still wants to ensure that China doesn’t appear to have been pressured into making all the concessions. The perception of a one-sided agreement could subject Mr. Xi to criticism from within the ruling Communist Party and other parts of the society, Chinese officials fear.

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Having taken control over all the levers of power in China, Mr. Xi has staked his credibility and popularity in large part on his image as someone willing and able to stand up to foreign pressure. During the protracted trade battle with Washington, Chinese officials say, he has consistently directed his lieutenants to strike back at tariff increases imposed by the Trump administration.

Following the collapse of trade talks earlier this year, Chinese state media was also instructed to speak out aggressively against what was described as American hegemony.

By the time U.S. and Chinese negotiators renewed discussions in October with the near-term goal of reaching a limited deal centered around agricultural trade, officials say, Mr. Xi was eager to strike a deal to help alleviate pressure on the Chinese economy, which faces a variety of challenges. Yet he hasn’t given up his desire to claim victory.

A U.S. proposal made in the past week, reported by The Wall Street Journal early Thursday, appeared to offer an opportunity for both leaders to walk away with a win. Under the proposal, Washington would slash existing tariffs by as much as half on roughly $360 billion of China-made goods, in addition to canceling fresh tariffs on $156 billion in Chinese goods that Mr. Trump had scheduled to kick in on Sunday.

In return, China would guarantee purchases of large quantities of American merchandise, especially soybeans, poultry and other farm products. The U.S. side would also have the right to bump tariff rates back up to their original levels again should China fail to carry out its pledges as part of the deal.

Michael Pillsbury, a Trump adviser, said Thursday that the deal calls for China to buy $50 billion of U.S. agricultural goods in 2020, along with energy and other products. In exchange, he said, the U.S. would reduce the tariff rates on many Chinese imports, which now range from 15% to 25%. He confirmed that the deal would include a “snapback” provision that would restore the original tariff rates if Beijing fails to make the agreed-upon purchases.

During recent discussions, however, Chinese negotiators have been reluctant to commit to the promised purchases of U.S. goods and have instead insisted on a clause that would allow China to reimpose tariffs on U.S. products should Washington fail to follow through on its tariff-reduction promises.

“The U.S. side often complains that China doesn’t follow through on its promises,” said one Beijing official involved in economic policy making. “Well, we don’t always trust them, either.”

Write to Lingling Wei at [email protected], Alex Leary at [email protected] and Andrew Restuccia at [email protected]

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