On Wednesday, January 15, 2020, United States President, Donald Trump, and Chinese Vice Premier of the People’s Republic of China, Liu He, took significant steps towards de-escalating the nearly two-year trade war by signing a Phase One trade agreement.
The long-awaited trade deal is comprehensive and covers everything from agricultural purchases to intellectual property rights.
Here’s what international importers and exporters can expect:
1. U.S. Tariff Reduction
As a sign of goodwill, under Phase One of the trade deal, the United States has agreed to lower tariffs from 15 percent to 7.5 percent on 3,800 HTS lines (Section 301 List 4A) in the next 30-days. All 25 percent tariffs will remain, however, as a Phase Two deal is negotiated.
USTR Notice of Modification (Section 301 List 4A) – January 15, 2020
2. Reduce China-U.S. Trade Deficit
To narrow the gap between how much China and the U.S. purchase from one another, China has agreed to purchase $200 billion worth of U.S. goods and services, $32 billion in agricultural products and $77.7 in manufactured goods, within the next two years.
3. Intellectual Property Protections
Intellectual Property rights were a large part of the Section 301 complaints against China and great concern for U.S. technology firms.
Beijing will now keep Chinese companies from forcing U.S. technology transfer in order to operate in China, increased penalties for intellectual property theft, and create legal procedures for U.S. companies seeking conflict resolution on alleged infractions.
4. Follow the IMF Rules
Unlike in the past, the Phase One deal seeks to eliminate tensions over China’s currency manipulation by having both parties agree to follow International Monetary Fund (IMF) rules regarding macroeconomic policy and not target each other’s foreign exchange rates or manipulate interest rates.
5. China Opens Markets on April 1
China has notoriously limited access for foreign companies into their domestic and financial markets. Under Phase One, China has announced it will permit insurance providers, asset management firms, and investment companies to operate in the country by April 1, 2020.
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