After the second day of high-level trade talks, United States President Donald Trump has announced that the US and China reached a “very substantial phase one deal”.
US officials had signalled good news was coming on Friday after the discussions ended, boosting investor hopes that the world’s two largest economies are cooling the fires of their 15-month trade war.
Trump said the agreement averts a threatened tariff hike and coversagricultural purchases, currency and some aspects of intellectual property, adding that it will take up to five weeks to get the deal written.
The remarks to reporters came after Trump’s meeting with Chinese Vice Premier Liu He, Beijing’s lead trade negotiator for the talks in Washington.
The partial agreement is expected to lay the groundwork for a broader deal that Trump and Chinese President Xi Jinping could sign later this year. But key sticking points remain around enforcement.
Major US stock indexes were trading significantly higher on hopes the talks would produce some sort of a deal, with the Dow Jones Industrial Average up over one percent.
‘Breaking the impasse’
Asked whether investors were right to be hopeful, US Treasury Secretary Steven Mnuchin told reporters at the White House that “the stock market is always right”.
China extended an official invite to Mnuchin, US Trade Representative Robert Lighthizer and their teams for trade talks in China ahead of next month’s Asia-Pacific Economic Cooperation (APEC) summit, a CNN reporter tweeted.
Striking an optimistic note, Trump had tweeted earlier on Friday that “good things” were happening in the talks.
A Chinese state newspaper said on Friday that a “partial” trade deal would benefit China and the US – and that Washington should take the offer, reflecting Beijing’s aim of ending the row before more tariffs kick in.
Both sides have slapped duties on hundreds of billions of dollars of goods during the dispute, and Trump had threatened to raise tariffs to 30 percent from 25 percent on about $250bn in Chinese goods on October 15 if there was no progress on a deal.
Mnuchin told reporters that Trump had agreed not to proceed with the hike in tariffs that was supposed to have gone into effect on Tuesday.
On Thursday, Liu said China would be willing to reach an agreement on matters that both sides care about, so as to prevent friction from leading to further escalation of the trade war. He stressed that “the Chinese side came with great sincerity”.
Adding to that, the official China Daily newspaper said in an editorial in English on Friday that “a partial deal is a more feasible objective”.
“Not only would it be of tangible benefit by breaking the impasse, but it would also create badly needed breathing space for both sides to reflect on the bigger picture,” the editorial said.
Analysts have noted China sent a larger-than-normal delegation of senior Chinese officials to Washington, with the country’s commerce minister, Zhong Shan, and deputy ministers for agriculture and technology also present.
However, Trump previously insisted he would not be satisfied with a partial deal to resolve his two-year effort to change China’s trade and industrial policies, which he argues cost millions of US jobs.
Pessimism still justified?
China’s securities regulator on Friday also unveiled a firm timetable for scrapping foreign ownership limits in futures, securities and mutual fund companies for the first time. Increasing foreign access to the sector has been among the US demands at the trade talks.
Beijing previously said it would further open up its financial sector on its own terms and at its own pace.
Chinese officials also are offering to increase annual purchases of US agricultural products, the Financial Times reported on Wednesday, citing unidentified sources.
The US Department of Agriculture on Thursday confirmed net sales of 142,172 tonnes of US pork to China in the week that ended October 3. It was the largest weekly sale to the world’s top pork market on record.
A US-China currency agreement is being floated as a symbol of progress – although that would largely repeat past pledges by China, currency experts say – and will not change the dollar-yuan relationship that has been a thorn in Trump’s side.
The optimism about a potential de-escalation of the trade war, which has roiled financial markets and uprooted global supply chains, is in stark contrast to gloomier predictions in business circles just days ago on the heels of a series of threatened crackdowns on China by the Trump administration.
On Tuesday, the US government widened its trade blacklist to include Chinese public security bureaus and some of China’s top artificial intelligence startups, punishing Beijing for its treatment of Muslim minorities.
Surprised by the move, Chinese government officials said earlier this week that they had lowered expectations for significant progress.
Friday’s China Daily editorial also warned that “pessimism is still justified”, noting that the talks would finish just days before Washington is due to implement higher tariffs.
The negotiations were the “only window” to end deteriorating relations, the editorial added.