What is US China Trade Agreement ?

What is US China Trade Agreement ?

The United States signed the first phase of its trade agreement with China last week. The agreement plays a part in resolving a long standing dispute between both countries, and comes after more than a year of hard negotiations, including several months of suspension of talks between two of the largest economies in the world.

Only the first phase of the agreement has been signed so far, and it includes agreements on Intellectual Property (IP) Protection and Enforcement, ending forced technology transfer, dramatic expansion of American agriculture, removing barriers to American financial services, ending currency manipulation, re-balancing the US-China trade relationship and effective dispute resolution.

However, the most important aspect of the deal is that China has agreed to purchase an additional $200 billion worth of US farm products and other goods and services over the next two years. This is over and above the $186 billion that China purchased from the US prior to trade war in 2017. The deal also has not removed the tariffs that US has imposed on $360 billion worth of Chinese imports, which might act as a leverage for the US administration for future negotiations. The US however has cancelled plans to impose tariffs on an additional $160 billion in Chinese imports, and has agreed to cut in half, to 7.5%, existing tariffs on $110 billion of goods from China.

China has also pledged not to competitively devalue its currency and has promised to be more transparent about its interventions in foreign exchange markets. In line with this promise, China has agreed to make public disclosures about its foreign exchange reserves and its quarterly imports of goods and services, among other things.

The trade war between China and the United States has affected the economies of both the countries, in addition to its impact on emerging markets like India. The tensions between the countries have affected the United States manufacturing sector and has lowered China’s exports to the United States. The first phase of the agreement is a significant step in resolving the dispute, and could restore some much needed confidence in global markets.

Sources: Various publications

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