Trade War Update: Phase One Trade Deal Resurfaced

Trade War Update: Phase
One Trade Deal Resurfaced

The US-China trade war that started in 2018 has escalated into tit-for-tat tariffs
on more than billions of dollars’ worth of trading goods, only to ease later in
January 2020 after  both sides signed the
‘Phase One’ trade deal. Matters such as intellectual property, China purchases
of US goods, tariffs, currency, and China financial services were the key
points in the phase one agreement.

In
the phase one agreement, China agreed to ramp up its purchases of US
manufacturing, energy, and agricultural goods and services by at least $200
billion over two years. In return, the US agreed to cut half of their tariffs
on Chinese goods to 7.5%, which was imposed on September 1. Further tariffs
that were scheduled by both sides to take effect on December 15 were also
suspended indefinitely. However, initial US tariffs of 25% on $250 billion
worth of Chinese goods remain.

After
the signing of the deal, both sides agreed to review the deal after six months,
specifically set on August 15. However, due to the pandemic, it was later
delayed to an unspecified date. After the setback, Chinese Vice Premier Liu He,
US Trade Representative Robert Lighthizer, and Treasury Secretary Steven
Mnuchin decided to hold a phone call discussion early Tuesday to discuss on
implementing the phase one agreement. During the phone call, the trade
negotiators addressed steps that had been taken by China to enforce structural
changes according to the agreement.

According
to the US Trade Representative Office’s statement, the discussions included
greater protection for intellectual property rights, welcoming of American
companies in the areas of financial services and agriculture, and the
elimination of forced technology transfer. The parties also discussed on
China’s increased purchases of US goods and future actions required to
implement the agreement further.

However,
from China’s front, their statement did not include thorough details on the
discussions. According to an official English-language version of the Commerce
Ministry’s statement, both parties’ discussions focused on strengthening
bilateral coordination of macroeconomic policies and the implementation of the
phase one agreement. Both sides had also agreed to continue moving forward in
the trade deal implementation.

Progress
in the trade war was previously muted by the Covid-19 pandemic, where tensions
between both sides worsened as focus was directed towards supporting their
respective economy and the healthcare of their citizens. The phone call on
Tuesday showed willingness from both sides in settling their disputes which had
impacted global trading.