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October 11, 2019 3:30 PM, EDT

US, China Reach Substantial ‘Phase One’ Trade Deal, Trump Says

Trade China’s Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer (Andrew Harrer/Bloomberg News)

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The U.S. and China agreed on the outlines of a partial trade accord Oct. 11 that President Donald Trump said he and his counterpart Xi Jinping could sign as soon as next month.

As part of the deal, China would significantly step up purchases of U.S. agricultural commodities, and agree to certain intellectual-property measures and concessions related to financial services and currency, Trump said at the White House. In exchange, the U.S. will delay a tariff increase due next week as the deal is finalized, though new levies scheduled for December haven’t yet been called off.

The agreement marks the largest breakthrough in the 18-month trade war that has hurt the economies of both nations. Importantly, Trump said the deal was the first phase of a broader agreement. The president indicated he could sign a deal with Xi at an upcoming November summit in Chile.

While the limited agreement may resolve some short-term issues, several of the thorniest disputes remain outstanding. U.S. goals in the trade war center around accusations of intellectual-property theft, forced technology transfer and complaints about Chinese industrial subsidies.

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The Trump administration also said issues related to Huawei Technologies Co. aren’t part of the Oct. 11 deal and will be a separate process. The Chinese telecommunications equipment maker, which was placed on an export blacklist in May, will be discussed in a second phase of the negotiations, the president told reporters later Oct. 11.

Equities advanced globally Oct. 11 amid growing conviction that the world’s two biggest economies would negotiate a trade truce, though U.S. stocks pared gains after Trump’s announcement near the close of trading.

Trump’s announcement drew a wary welcome from even Republicans on Capitol Hill.

“After so much has been sacrificed, Americans will settle for nothing less than a full, enforceable and fair deal with China,” Senate Finance Committee Chairman Chuck Grassley said in a statement after the announcement. “Farmers in Iowa know far too well that the trade war has caused real financial pain in the heartland. But we need to know more about this deal and follow-through from China will be key.”

On Oct. 10 and earlier Oct. 11, Liu and U.S. Trade Representative Robert Lighthizer held the first senior-level discussions between Washington and Beijing since a previous agreement fell apart in May and tariffs were raised in the months after.

The U.S. was threatening to increase tariffs Oct. 15 on about $250 billion of Chinese imports to 30% from 25%. More duties on $160 billion of Chinese products were targeted for Dec. 15.

The threat of those import taxes on U.S. consumers, falling around the holiday season, raised the prospect that the U.S. economy would slide toward a recession heading into Trump’s 2020 reelection bid. The American manufacturing industry, which Trump vowed in 2016 to revitalize, is already contracting in part because of the trade war.

The Trump administration said that as part of the deal, China would scale its purchases of U.S. farm goods over two years to an annual total of $40 billion to $50 billion. Trump encouraged U.S. farmers to buy more land and Deere & Co. tractors in response.

China in recent weeks had already discussed buying more U.S. products such as soybeans, pork and wheat. Some traders remained skeptical that buying soybeans from the U.S. represented a significant breakthrough in the overall trade talks, Bloomberg reported Oct. 11.

Trump tweeted earlier Oct. 11 that if the countries did reach an agreement, he would be able to sign it without a lengthy congressional approval process.

Sen. Ronald Wyden, the ranking Democrat on the Finance Committee that has jurisdiction over trade policy, pushed back on Trump’s tweet in a statement Oct. 11 to Bloomberg News: “Donald Trump should know that any meaningful trade deal is only legitimate because of the authority granted to him by Congress, and that authority can be taken away,” he said.

Under the U.S. Constitution, Congress holds power over international trade. For decades, it has legally delegated trade-negotiating authority to the executive branch. Lawmakers in recent months have grown increasingly wary of what they see as Trump’s abuse of that authority and discussed ways to claw it back, citing the president’s many unilateral tariff measures and a lack of transparency in negotiations.

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