The Econ-versation: Update on the U.S.-China Phase 1 trade deal

Silvia Buonocore, Senior Writer

In mid-January, the United States and China signed Phase 1 of their trade deal, with components of the deal set to go into effect mid-February. The deal detailed that China agreed to buy $200 billion of goods from the United States over the next two years, including items such as soybeans and machinery. The Chinese government also committed to improving business practices, opening markets for more American firms, and increasing protection of American technology and trade secrets.

However China’s rapidly spreading coronavirus outbreak may serve to delay trade deal commitments. The virus has already hurt China’s economy, with decreased travel severely impacting supply chains, and as a result many factories and stores have shuttered temporarily. Additionally, preoccupation with containing the novel virus has dethroned trade deal requirements as a major priority of the Chinese government.

The trade deal included a clause to reconvene if any unforeseen disasters or events were to take place. Nonetheless, setbacks to the trade deal can damage already shaky trade relations between China and the United States.

The virus itself is predicted to have a constrict global growth, although the magnitude and length of the impact are unknown. The trade deal is still predicted to have an overall positive impact, though potentially a small one, since tariffs remain in place on a substantial amount of Chinese goods.

In the United States, the remaining tariffs seem to be causing a stir, as the Trump administration continues to deny more and more tariff-exemption requests from countless companies. In exemption requests, many companies cite a lack of practical alternatives to many Chinese products. Yet, the Trump administration maintains that the tariffs encourage China to alter unfair business practices and increase domestic production and consumption.

Currently, over 52,700 exemption requests by over 4,500 companies have been filed to the United States Trade Representative (USTR). Yet, the Trump administration maintains that the tariffs are remaining in place as leverage until the next phase of the trade deal. Future action will largely depend on China’s next moves.

Information originally reported on The New York Times and The Wall Street Journal.

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