Daily Times

The US-China trade war, which broke out almost two years ago, appears to enter its reconciliatory phase when US President Donald Trump signed a partial trade deal with China on January 15, 2020. The trade truce envisages the easing of the US-China trade conflict in recent times. The “phase one” of the trade deal urges China to purchase an additional $200 billion US products for the next two years. Previously, China bought $186 billion of US goods and services in 2017. Donald Trump expressed its optimism while signing the truce, “Today we take a momentous step… towards a future of fair and reciprocal trade as we sign phase one of the historic trade deal between the United States and China.”

China’s economy, during recent times, witnessed the slowest growth in almost three decades. The worst figure in China’s economic expansion by 6.1 percent in 29 years is the courtesy of the trade war. The tariffs imposed by the US on Chinese products as a result of the trade war began to hit China’s economy severely. As of November 2019, China’s exports to the US fell 23 percent from a year earlier to $35.6 billion. During the trade war, the US imposed 25 percent tariffs on $250 billion worth of Chinese goods. Google shifted much of its production of US-bound motherboards to Taiwan, to avert the fear of tariffs. The tech giants: Microsoft, HP, Dell, Apple, and Amazon are looking to move more of their production industry outside China. The downward tendency in China’s economic circumstances brought it to the negotiating table. On the other hand, the realization of the trade truce can provide Donald Trump leverage to ensure his victory for another term. Thus, Donald Trump came into action to substantiate the trade deal. As a result, the US agreed to cut short its tariffs on Chinese exports to the US worth $120 billion and China will ensure the purchase of US goods worth $200 billion. Out of $200 billion, the target for manufactured goods purchases will be the largest, with worth $75 billion. China will buy $50 billion worth of energy, $40 billion in agriculture, and $35 to $40 billion in services. Given all these facts, both parties resorted to embarking on reducing the trade friction.

The tariffs imposed by the US on Chinese products as a result of the trade war began to hit China’s economy severely. As of November 2019, China’s exports to the US fell 23 percent from a year earlier to $35.6 billion

Following phase one of partial trade truce, the question boils down, who would get benefits from the deal?

The US has imposed tariffs on more than $370 billion of Chinese goods, and China has retaliated with tariffs on $110 billion of US products. As a part of the deal, the US agreed to maintain 25 percent tariffs on $250 billion. For the rest of $120 billion, the US demoted tariffs on Chinese products from 15 percent to 7 percent. Consequently, the US granted China a mere relief of $9 billion. In return, the US persuaded China to purchase US goods worth $200 billion over the next two years. In the deal, China has committed to freeze its currency manipulation against the US dollar. These developments indicate triumph in favor of the US, leaving China left with a few prerogatives.

Does the trade truce bear the potential to make up the loss produced by the trade war?

The trade deal has given the new flavor to the ill-natured US-China ties since there is the prospect of a global economic renaissance. However, many flawed areas of the trade war in the truce remained unaddressed. The technology was one of the most affected subjects in the trade war. The US blamed that Huawei is responsible for cyber-espionage, which is a threat to US national security. Therefore, the US put Huawei on a trade blacklist. The deal is deficient in bringing resolution to address the tech-turmoil originated by the trade war. The deal has no provisions for lifting the US ban on Huawei. Likewise, in the deal, China did not pledge to abstain from the hacking of US companies to steal their intellectual property. In the following spheres, the success of the deal rings hollow. Besides, the European Union trade commissioner, Phil Hogan has criticized the phase one trade deal for offering limited economic benefits, suggesting it was mainly a political deed by Donald Trump to win re-election.

In a nutshell, at times, when the trade war was unlikely to tame, the trade truce might bring something good for the global market. One instance is that the Pork market emerged as the biggest beneficiary soon after the signing of the truce. The US Department of Agriculture released a report that delivers optimistic message to US farmers: Chinese demand for pork is likely to boost the US pork markets in 2020. However, the areas which were unaddressed in the phase one, one can assume their resolution under phase two of the trade deal. Moreover, the brainchild of the trade deal by the US and China may prevent further escalation in tariffs. But the subsequent events between the US and China will decide the future of the trade war.

The writer is an electrical engineer who is also a CSS aspirant