The Trump administration has dropped its plan to impose new tariffs on $160 billion of Chinese imports beginning Sunday under a modest interim deal that de-escalates a 17-month trade war between the world's two biggest economies.
As part of the agreement announced Friday, the administration is also reducing its existing import taxes on about $112 billion in Chinese goods from 15% to 7.5%.
In return, U.S. Trade Representative Robert Lighthizer told reporters, China agreed to buy $32 billion in U.S. farm products over two years. Beijing has also committed to ending a long-standing practice of pressuring companies to hand over their technology as a condition of gaining access to the Chinese market.
Lighthizer said China had also agreed to lift nontariff barriers to the Chinese market for such products as beef, poultry, seafood, pet food and animal feed.
In all, the U.S. expects a $200 billion boost in exports over two years as a result of the deal.
"We expect the trade deficit to go down for sure," Lighthizer said, adding that the deal will likely be signed the first week in January and take effect 30 days later.
"Everything is written," he said. "Everything is completely finished."
Yet the administration released no detailed paperwork on the agreement and said the text was still being translated between Chinese and English. In the past, the two sides had appeared to be close to firm agreements only to see negotiations fall apart.
The so-called Phase 1 agreement leaves some major issues unresolved, notably U.S. complaints that China unfairly subsidizes its own companies to give them an edge in world markets.
The deal does, however, at least temporarily defuse a conflict that has unnerved financial markets and hobbled global economic growth.
"This deal should go a long way in reversing the downward spiral in bilateral trade relations and increasing certainty for U.S. businesses," said Wendy Cutler, a former U.S. trade negotiator who is now vice president at the Asia Society Policy Institute.
But, Cutler cautioned, "it's unclear on how far the Phase 1 agreement goes in addressing the key structural issues that brought the U.S. to the negotiating table 17 months ago."
President Donald Trump, who first announced the agreement via Twitter, said that work on a follow-up Phase 2 agreement would begin immediately.
Since July 2018, the Trump administration has imposed a series of trade sanctions on China, sometimes changing or delaying planned tariff rates.
Friday's announcement means that the U.S. will continue to impose 25% import taxes on $250 billion in Chinese goods and will halve the tariffs on another $112 billion to 7.5%. It will drop plans to target an additional $160 billion. That step would have extended the tariffs to just about everything China sells the United States and would have hit consumer items such as toys and smartphones that have so far largely been spared.
Beijing has retaliated by taxing $120 billion in U.S. exports, including soybeans and other farm products that are vital to many of Trump's supporters in rural America.
Rob Atkinson, president of the Information Technology and Innovation Foundation, said "the agreement represents progress" but said "the United States must still comprehensively address China's rampant innovation mercantilist practices."
Mary Lovely, a trade economist at the Peterson Institute for International Economics, said it"s unlikely that Friday's deal delivers enough benefits for the U.S. to outweigh the costs of the trade fight so far.