WASHINGTON: The United States and China announced a major thaw in their trade war on Friday (Dec 13), including immediate cuts to punishing import tariffs, but markets were not impressed.
"We have agreed to a very large Phase One Deal with China," President Donald Trump tweeted after officials in Beijing made a similar announcement.
A signing of the deal at ministerial level is expected for "the first week of January", a senior Trump administration official told reporters.
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READ: US-China trade deal gets tepid reception
The news is a boon for Trump who faces a congressional vote on impeachment for abuse of office next week. With his 2020 reelection campaign gathering pace, he needs to show voters that his habit of starting bruising trade wars is bearing fruit.
So after multiple false dawns in the tussle between the world's top two economies, which Trump launched in March 2018, investors were relieved to see him cancel a new round of tariffs due to kick in on Sunday.
Those levies, which would have hit consumer electronics like cell phones and computers, "will not be charged because of the fact that we made the deal", Trump tweeted.
In a major concession, Washington will also slash in half the 15 per cent tariffs imposed on US$120 billion in Chinese goods, like clothing, that were imposed Sep 1 and had a bigger impact on American shoppers than previous rounds.
But Trump said existing tariffs of 25 per cent on US$250 billion of Chinese imports would stay in place pending further negotiations on a second phase deal.
In return, US officials say, China is committing to increasing purchases in four sectors: Agriculture, manufacturing, energy, and services.
Purchases will hit "at least US$200 billion dollars over the next two years," the administration official explained, on condition of anonymity.
If the purchases are made, they would represent a huge jump in US exports to China. China bought US$130 billion in US goods in 2017, before the trade war began, and US$56 billion in services, US Bureau of Economic Analysis data show.
In addition, the official said, China is agreeing to start structural reforms, including on the key problem of intellectual property rights.
REPRIEVE FOR US FARMERS
American farmers who bore the brunt of the trade war and retaliation by Beijing which slashed exports, will especially benefit from the increased purchases, US officials say.
"I think in agriculture they will hit US$50 billion," and take effect "pretty soon", Trump told reporters at the White House.
Beijing has committed to buying US$32 billion more in farm products over the next two years, or about US$16 billion a year, US Trade Representative Robert Lighthizer told reporters at the White House, on top of a baseline of US$24 billion in Chinese purchases in 2017. In addition, Beijing said it would make a big effort to spend an additional US$5 billion a year.
"To me it's an enormously important first step in our relationship," Lighthizer said. "This is China taking real commitments to do real things in a reasonable period of time, that's enforceable."
China will import more US wheat, corn, and rice, China's vice agricultural minister said on Friday, without elaborating.
Meanwhile, China's Vice Finance Minister Liao Min told reporters that Beijing would also call off retaliatory tariffs planned to respond to Sunday's now scrapped US measures.
Vice Commerce Minister Wang Shouwen said the initial agreement includes strengthening protection of intellectual property rights, expanding market access and safeguarding rights of foreign companies - issues at the heart of US complaints.
"It is hoped that both sides will abide by the agreement, work hard to implement the relevant contents of the first phase of the agreement."
READ: The US-China trade war: Where are we now?
The US official told reporters that Washington is satisfied it can enforce the deal, "potentially in the form of tariffs".
SCEPTICISM IS HIGH
Though investors were relieved to see Sunday's threatened tariffs removed, US stock markets didn't appear to like the deal much.
Trade economist Mary Lovely said the deal could only be viewed as a "partial win" which "didn't move the needle very much."
The gains do not compensate for the damage to US farmers and businesses, she told reporters.
"President Trump is desperately trying to get back to where the economy was 18 months ago," before taking this "unilateral, brute force approach," Lovely said.
In a sign that tensions remain high, Foreign Minister Wang Yi said earlier Washington was "suppressing" China in a number of fields, including the economy, trade and technology and had "seriously damaged the foundation of hard-earned trust between China and the US."
Washington has also angered Beijing by backing Hong Kong's pro-democracy movement and criticising China's mass detention of mostly Muslim minorities in the northwest region of Xinjiang.
Lighthizer told reporters on Friday that both sides could start negotiating on more difficult issues before the 2020 election in November.
"This is very hard stuff," he said. "We have systems that are different. We have to figure out a way to integrate those systems and get it to a place where it benefits the United States more than it does."