China, U.S. Sign ‘Phase One’ of Trade Deal
The United States and China held a signing ceremony to finalize phase one of a trade deal on January 15, according to Forbes. This deal applies for the next two years and may help de-escalate the current trade war.
In the deal, China pledged to buy $200 billion of U.S. goods, according to Forbes. This money would be split among different industrial sectors, according to Reuters. Aside from product purchases, China also pledged to respect U.S. intellectual property.
Moreover, the deal states that “[t]he Parties shall refrain from competitive devaluation and will not target exchange rates for competitive purchase.” This will provide more transparency in currency markets, as China has long been accused of manipulating currency, the New York Times reports. As for the Trump administration, they suspended various tariffs and halved others, according to Reuters.
However, the trade deal may not be as productive as it appears. According to the New York Times, implementing and enforcing the deal could be very difficult. Some provisions are vaguely worded, and the deal has a non-traditional dispute committee. Typically, countries appoint a neutral third party to work out disputes.
However, for this deal, the United States and China created a Bilateral Resolution and Dispute Resolution Office to evaluate issues that may occur, reports the New York Times. This would allow the two countries to easily re-escalate the trade war by reenacting various tariffs.
While it expires after two years, the deal holds serious long-term implications. The deal suggests that international trade between the two countries will now be dependent on U.S.- China relations.