Tariff Reduction Coming in 30 Days, but 25% Tariffs to Stay Until Phase Two Is Done
The U.S. will reduce tariffs on about 3,800 8-digit tariff lines from 15 percent to 7.5 percent in 30 days, a senior administration official said. That's the day the phase one agreement with China will go into force, he said on a conference call with reporters. Aside from that issue, most of the agreement affects exporters and companies that invest in China more than it does importers.
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China agreed to buy $120 billion worth of manufactured goods in 2020 -- nearly $33 billion more than it did in 2017 -- and $40 billion worth of agricultural commodities -- $12.5 billion more than in 2017 -- in the phase one trade deal signed Jan. 15.
President Donald Trump, who signed the deal alongside Vice Premier Liu He, said during a White House ceremony that phase one is “a transformative deal” and “a sea change in international trade.“ In addition to the purchases, Trump noted that China is cracking down on fentanyl exports, and promises to take “firm action to counteract pirated and counterfeit goods.“
Democrats were less impressed, with House Ways and Means Chairman Richard Neal, D-Mass., saying: “the jury is still out on how ‘historic’ this deal is,” and pro-trade Rep. Ron Kind, D-Wis., saying: “The President has frequently promised that his negotiations would lead to the best trade agreements for our farmers, but his track record proves different.”
Businesses had varied reactions, with import-reliant trade groups highlighting the lack of tariff relief -- and the possibility of tariffs in the future if the U.S. feels China is not following through -- and others, like the National Association of Manufacturers, emphasizing the progress. That group's CEO Jay Timmons, who attended the signing, said, “Because of the President’s tenacity and focus, this is an indisputable win for our country and a momentous day in the U.S.-China economic relationship. It is a remarkable turning point for manufacturers, with the unprecedented and enforceable commitments on critical intellectual property protections to which China has agreed.”
All the 25 percent tariffs will remain in place on Chinese imports as phase two is negotiated, because “otherwise, we have no cards to negotiate with,” Trump said. He said he would take them off if a phase two deal is reached.
A letter from Chinese President Xi Jinping read during the ceremony emphasized that he hopes that the U.S. will treat Chinese companies fairly when they wish to invest in the U.S., and said that continued cooperation between Chinese and American schools, colleges and research institutes would “enhance mutual trust and cooperation between us.”
Liu He called the text “an extensive agreement,” and said China will strictly honor it, and assure a good implementation to set up the second phase of negotiations.