US-China Phase One trade deal: Much hailed but minimal

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Ambassador Tran Duc Mau 14:30, 2019/10/14

There remain three main obstacles whose solutions would be decisive for ending the trade conflict remain unresolved.

The US and China reached an agreement at their 13th round of trade talks in Washington. US President Donald Trump, as always, did not skimp on the fine words he could find to praise this result. At least, the US and China reached an agreement after so many bilateral trade talks. At least, there is something which both parties could present as success and achievement, as a result of good will and patience. Or rather, they considered it as success and achievement.

President Donald Trump shakes hands with Chinese Vice Premier Liu He after announcing a “phase one” trade agreement with China in the Oval Office on October 11. Photo: Win McNamee/Getty Images

According to this agreement, the US refrains from increasing punitive trade tariff from 25% to 30% on US$250 billion worth of Chinese exports into the US starting October 15th and China accepted to buy US$40 billion to US$50 billion worth of farm produce from the US. The US got also some commitments from China on currency policy and intellectual property rights protection. All these are intents of the first phase of a deal to end the trade war between them and to suspend any tariff hike threatened by both sides.

The US and China hailed this agreement because they both direly wanted it and need it, now more urgently than ever before. They need solutions to the conflict or at least to deescalate it because of its growing negative impacts on their economies and societies which in no way could be good for the leadership in the US and China. That is why this round of trade talks got this outcome. It was only minimal and weighted more on internal politics for both. It gave them a breather.

This agreement, despite how much acclamation by both sides, was not fundamental enough to prevent any escalation of the trade conflict in the coming months. The US and China are now still very far from reaching lasting and comprehensive trade agreements. They have already anticipated the second phrase of their "big and great" trade deals. But their newly achieved trade agreement cannot be a guarantee for the successful conclusion of this second phase.

The three main obstacles whose solutions would be decisive for ending the trade conflict remain unresolved: the US' crusade against China's ambitions with its strategic and far-reaching "Made in China 2025" plan; the remarkable reduction of the US's enormous trade deficit with China and the verification of China's fulfillment of all commitments to the US. But this agreement is still much better than nothing.

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