United States will reduce the 15 % tariffs imposed on a wide range of Chinese consumer goods by half and also cancel another round of tariffs implemented in December. On its part, China will buy an additional USD 12.5 billion worth of agricultural products from the US in the first year and UDF 19.5 billion worth of goods in second year. These purchases will be a part a broader USD 200 billion package that includes manufactured goods and energy exports by 2021.
Recording a milestone world-trade history, United States and China finally signed a preliminary trade deal that ended the 18-month long trade conflict between the two countries. The deal was signed between the US President Donald Trump and Chinese Vice President Liu He.
What I s in the deal
The deal states henceforth, United States will reduce the 15 per cent tariffs imposed on a wide range of Chinese consumer goods by half and also cancel another round of tariffs implemented in December. On its part, China will buy an additional USD12.5 billion worth of agricultural products from the US in the first year and USD19.5 billion worth of goods in second year. These purchases will be a part a broader USD200 billion package that includes manufactured goods and energy exports by 2021. They will continue beyond the two-year deal into 2022 through 2025. Some of the products that China has promised to buy include soybeans, wheat, cotton and pork.
These changes will take effect within 30 days of signing of the pact. The deal protects American companies from thefts of intellectual property and trade secrets by imposing anti-counterfeiting measures on them. It also removes a barrier in the sale of US technologies and loosens up the requirements of Chinese banks wanting to operate in the country. However, while China has agreed to purchase more US products, it has not made any specific commitments to reduce tariffs imposed on the US.
NRF welcomes the deal
U.S. National Retail Federation has welcomed the signing of this trade agreement. “We support the US administration’s efforts to address the unfair trade practices adopted by China,” said Matthew Shay, CEO of the federation hoping that this is the first step taken by the government towards eliminating all tariffs imposed over the past two years. “The trade war won’t be over until all of these tariffs are gone,” he added.
Thumbs down from apparel industry
However, the apparel and footwear industry is not too pleased with this deal. “It provides the apparel and footwear industry with very limited tariff relief following the biggest tariff increase since the Great Depression,” said Steve Lamar, President and CEO of the American Apparel &Footwear Association (AAFA). “Tariffs will continue to hit all our products including 92 % of the apparel, 53 % of the footwear, 68 % of the home textiles, and all of the travel goods and accessories that are imported from China, which is the primary source of these products. Not only does the deal retain the tariffs on key imports of materials and machinery used to make clothing, footwear, and textiles in the US, it also allows China to impose huge retaliatory tariffs on American exports of cotton, hides, leather, textiles, shoes, and clothing,” added Lamar. The tariffs can thus be used as an enforcement mechanism, leading to new tariffs at any time. “It cannot be an effective way to change policies and practices in China,” highlighted Lamar.