The US and China have reached a deal to partially ratchet down their trade war, ushering in a fragile detente in their economic relations after 20 months of on-and-off negotiations and tariff escalations that unsettled markets and damped global growth. The agreement, which was confirmed by officials in both Washington and Beijing on Friday, commits China to buying at least $4obn of US agricultural goods annually, tightens protection for US intellectual property and bans the forced transfer of technology from US companies.
It also contains commitments on the Chinese side against competitive devaluations of its currency and measures to improve access to its market for US financial services groups. However, China did not make concessions on some of the biggest sources of strain in the bilateral relationship, such as its use of industrial subsidies and state-owned enterprises, as well as cybertheft, leaving those thorny issues to a later stage.
In exchange for those concessions, the US agreed not to proceed with a new escalation in levies on $156bn of Chinese consumer goods planned for Sunday, and it will cut tariffs on $12obn of Chinese imports that were introduced in September to 7.5 per cent from 15 per cent. Washington is still maintaining 25 per cent tariffs on about half of all Chinese imports, worth about $25obn, which were introduced since the trade war began between the world’s two largest economies in March 2018.
The agreement still needs to be legally vetted and translated. It is expected to be signed in early January and take effect a month later. Assuming it holds, it marks the most significant de-escalation in trade tensions between Washington and Beijing since the tariff fight began. “It’s going to ultimately lead to the opening of China, which is something that is incredible, because that’s a whole, big, untapped market of 1.5bn people,” Donald Trump, the US president, said, as he celebrated the agreement.