On Wednesday, China and the US signed the deal in Washington, raising hopes of improvement of trade ties between the two countries hit by the tit-for-tat tariff hikes of nearly half-a-trillion dollars worth of products.
China on Thursday said the phase-1 trade deal signed with the US “considerably addressed” mutual concerns and is “good” for both the countries, as the world’s two top economic powers move forward to end their bitter two-year tariff war that has rattled markets and weighed on the global economy. On Wednesday, China and the US signed the deal in Washington, raising hopes of improvement of trade ties between the two countries hit by the tit-for-tat tariff hikes of nearly half-a-trillion dollars worth of products.
The deal was signed by US President Donald Trump and Chinese Vice Premier and top trade negotiator Liu He at a special ceremony at the White House. Briefing the Chinese media after signing the deal, Liu said the phase-1 trade agreement has “considerably addressed the concerns” of both sides. It has both economic and political significance with bearing on world peace and prosperity, state-run Xinhua news agency quoted Liu as saying.
The deal has injected positive energy into the stability and development of the world economy, he said, adding that China’s commitments under the deal on intellectual property rights (IPR) protection, technology transfer and financial market opening would also be applied to Beijing’s other trading partners. China will further deepen domestic reforms and open up wider to the outside world, Liu said. Commenting on the state of the Chinese economy, which was on a slowdown due to the trade war, Liu said China’s gross domestic product is estimated to record over six per cent for the full year of 2019, which would fulfil the annual growth target between 6 and 6.5 per cent.
While Trump praised the deal, asserting that it “marks a sea change in international trade”, Chinese President Xi Jinping said the agreement “is good for China, for the US and for the whole world”. In his letter to Trump, that was read out by Liu during the signing ceremony, Xi said, “It (the deal) shows that the two countries have the ability to act on the basis of equality and mutual respect, and work through dialogue and consultation to properly handle and effectively resolve relevant issues.”
In the next step, Xi said, the two sides should implement the deal in real earnest and optimise its positive impact to make greater progress in the bilateral trade ties. In an apparent reference to the US ban on Chinese telecom giant Huawei, Xi called on Washington to treat Chinese companies fairly. “I hope the US side will treat fairly Chinese companies and their regular trade and investment activities, and give support to the collaboration between enterprises, research institutes, and schools and colleges of the two countries as it will help enhance mutual trust and cooperation between us,” he said.
Significantly the text of Xi’s letter was released by the White House and not by the Chinese official media. According to analysts, with relentless pro-democracy protests in Hong Kong and increasing strategic competition with the US on many fronts, China has agreed for some intrusive mechanism to enforce the deal. Also much to the chagrin of Beijing, America’s 25 per cent tariff on USD 360 billions worth of Chinese products stays. Trump launched the trade war with China in 2018, demanding Beijing to reduce the massive trade deficit, which was USD 375.6 billion in 2017.
Both sides so far have imposed additional tariffs on nearly USD half trillion worth of goods. The US has imposed tariffs on more than USD 360 billions of Chinese goods, and China has retaliated with tariffs on over USD 110 billions of American products. The official media hailed the deal as a hard-fought agreement, which should be cherished by both the sides. “China and the US eventually signed the phase one trade agreement. The hard-fought agreement should be cherished by both sides,” the Global Times said in its editorial on Thursday.
The editorial noted that though a huge uncertainty remains, which might make it difficult for China and the US to reach a comprehensive trade deal, “the preliminary agreement will enlighten both sides’ further efforts”. Xinhua in its commentary piece said the deal shows that the two sides are looking for “a more reasonable approach” to managing their differences. However, it warned that the deal should only be considered “a good start” to address a dispute that is “long-term, complicated and arduous”.
The People’s Daily, the official media of the ruling Communist Party of China, struck a hopeful note, stating that the bilateral trade relationship “is now standing at a new starting point”. China’s “huge demand” means it should have no problem buying an additional USD 200 billions of American goods, which Beijing has committed to buy under the deal.
The deal is less of an agreement and “more of an MoU with spending targets”, Beijing-based current affairs commentator Einar Tangen said. “Enforcement will be a major issue, both politically and practically. The reason for the secrecy is revealed because the big numbers have weak enforceability. Trump has defined political transactionalism. Expect China Hawks and Democrats to pounce on this agreement, as far from comprehensive or enforceable” he told PTI.
Shen Jianguang, chief economist at Chinese fintech giant JD Finance said despite the deal, the road ahead remains full of obstacles. “Even if the trade agreement is implemented in the short term, the losses caused by the tariffs that have been imposed are difficult to recover,” he was quoted as saying by the Hong Kong-based South China Morning Post.