The US/China Phase 1 trade deal is done — but it's just an appetizer
Excuse me, waiter?... Markets got served some much-needed sustenance Friday — the long-awaited "Phase 1" trade deal was publicly announced by American and Chinese representatives. Here's what the trade adversaries agreed to at the table:
- The US gives China tariff relief: $156B in new tariffs were scheduled to hit yesterday, which would've increased prices on made-in-China stuff you actually buy (iPhones, Nike shoes, InstaPots). Those tariffs got cancelled and some existing ones were cut in half.
- China gives the US some soybean orders: China stopped buying US agricultural goods in response to those tariffs — that hurt American farmers. As thanks for the tariff relief, China committed to "massive purchases" of US agricultural, energy, and manufactured goods.
How's the meal going?... Depends which diner you ask. America's commitments are immediate and specific, while China's are eventual and vague (details to be announced in the future). The Phase 1 pact still hasn't been signed and the official text wasn't revealed, so we're stuck working off public statements from the table of trade negotiators.
This was just the appetizer to the trade deal meal — we're still waiting for the entrée... Investors were happy for the drop in tension, but they want truly harmonious trade relations between the US and China. Phase 2 will need to address these meatier issues, but Trump said it won't come until after the 2020 election:
- China's government forces US companies doing business there to share their biz/tech secrets.
- China's government subsidizes Chinese companies, while banning or limiting American companies' access to the Chinese market.
- America's government is suspicious of Chinese tech, blacklisting made-in-China parts from US infrastructure.