The 17-month-long trade war was initiated last July when United States levied tariffs on Chinese goods in an attempt to compel the communist regime to address a range of unfair trade practices, including theft of US intellectual property, forced technology transfer, subsidies for domestic industries, and currency manipulation. Agricultural purchases by the Chinese will increase, but officials did not specify by how much. The next step is for both sides to go through legal steps and set a time for signing the deal, according to a CNBC translation.
The White House hasn't yet confirmed such an agreement.
The administration has reached out to allies on Capitol Hill and in the business community to issue statements of support once the announcement is made, sources told Bloomberg.
If they play tough on this, Trump might pull the deal off altogether, which would reverse things immediately and send risk assets diving, so watch out for comments from both sides in the following hours.
China will import more USA wheat, corn, and rice after the deal, China's vice agricultural minister said Friday, but did not elaborate. "Getting VERY close to a BIG DEAL with China", Trump posted on Twitter. They want it, and so do we!
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With his 2020 re-election battle heating up Trump is keen to seize the political initiative and show voters his punishing struggle with China has brought results.
Trump, with Chinese Vice Premier Liu He in the Oval Office on October 11, announced a "substantial Phase One deal" of a trade pact. Meanwhile, existing 25% levies on $250 billion in goods, that were part of the first three rounds of tariffs, will remain in place. Discussions now are focused on reducing those rates by as much as half, as part of the interim agreement Trump announced nearly nine weeks ago.
The U.S. has agreed to suspend tariffs on $160 billion in Chinese goods due to go into effect on December 15, Trump said, and cut existing tariffs to 7.5%.
Tariffs on the first batch kicked in on September 1, hitting USA goods including soybeans, pork, beef, chemicals, and crude oil. Click the link to confirm your subscription and begin receiving our newsletters.
Chinese officials have announced a preliminary agreement on phase one of negotiations with the United States - and of course US President Trump has leapt onto his favourite digital soap box to add his cents worth.
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Derek Scissors, a China analyst at the American Enterprise Institute who has regular contact with administration officials, said, "A cut in tariff rates was offered to the Chinese last week, but their original reaction wasn't considered sufficient by the U.S".
The USTR added that the deal requires structural reforms to China's economic and trade regime and covers contentious areas including intellectual property and Beijing's practice of forcing US firms to transfer technological know-how to Chinese partners.
"What Trump is saying and what China is responding to would suggest that maybe we are more at a status quo level of a detente than at further deterioration in relationships", said Willie Delwiche, investment strategist at Baird.
"The U.S. didn't move the needle very much".
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