The source for trade compliance news
NOTE: The following report appears in both International Trade Today and Export Compliance Daily.

Trump Cancels Oct. 15 Tariff Hike, Announces First Phase of Deal With China

President Donald Trump announced a "very substantial phase 1" deal in the Oval Office Oct. 11, saying the Chinese and American negotiators came to a deal on intellectual property, financial services and agricultural sales. The president said China will buy as much as $40 billion to $50 billion worth of American commodities. He also said good progress had been made on issues around technology transfer from American companies to Chinese partners.

Reporters present at the announcement quoted him as saying that the deal is "subject to being written," and that would take weeks, but that the Oct. 15 tariff hike has been canceled. That hike would have taken Section 301 additional tariffs of 25 percent to 30 percent on Lists 1, 2 and 3, about $250 billion worth of imports. Treasury Secretary Stephen Mnuchin said discussions are "almost complete," but also said, "We have a fundamental understanding of the key issues, but there is more work to do."

Liu He, the chief Chinese negotiator, said, "We have made substantial progress in many fields, and we are happy about it." Trump said if the details are ready, he and China's president could sign a deal at the Asia-Pacific Economic Cooperation meeting Nov. 16 or 17.

U.S. Trade Representative Robert Lighthizer said export controls that affect Huawei are not part of this Phase 1 agreement. Senate Minority Leader Chuck Schumer, D-N.Y., responding to earlier news of the outlines of the interim deal, had warned that giving concessions on Huawei would show weakness.

Trump said the next phase of trade talks would begin immediately after the first deal is signed. Lighthizer said Trump has not decided whether the Dec. 15 round of tariffs will proceed.

Derek Scissors, a China expert at the American Enterprise Institute who communicates with White House players, said that negotiators were trying to get concessions from China worth postponing the Dec. 15 tariffs for, "and didn’t quite make it."

He said that if a rollback of Sept. 1 tariffs is going to be part of a November deal, the next round of negotiations needs to happen soon. "They have a lot of work to do before the APEC meeting," he told International Trade Today after the announcement. "The President is happy today but even he just gave ground and mentioned 'phase 3,' because there’s a lot more for the US to get."

Senate Finance Committee Chairman Chuck Grassley, R-Iowa, reacted to the news cautiously, saying that any progress is good news, "but we need to know more about this deal and follow-through from China will be key.... A final deal must address the full scope of structural issues identified in USTR’s Section 301 report and include strong enforcement mechanisms. After so much has been sacrificed, Americans will settle for nothing less than a full, enforceable and fair deal with China."

An editorial in China Daily, published before the announcement, said, "Washington should appreciate by now, that no matter how much pressure it applies, Beijing will by no means surrender China's development path by giving in to the unreasonable broad deal Washington is so gun-boatedly trying to engineer.

"A partial deal is a more feasible objective, and one that would be in the common interests of both sides. Not only would it be of tangible benefit by breaking the impasse, but it would also create badly needed breathing space for both sides to reflect on the bigger picture than who does what to please the other."

American businesses hailed that breathing space. "The ‘phase one’ deal is a step in the right direction," the Information Technology Industry Council said. "It’s critical that both sides capitalize on this momentum to conclude a broader agreement that addresses longstanding unfair trade practices and policies in a meaningful way and rolls back detrimental tariffs. It’s time for this trade war to come to an end."

The National Retail Federation said: "Although this is a step in the right direction, the uncertainty continues. We urge both sides to stay at the negotiating table with the goal of lifting all tariffs and fundamentally resetting U.S.-China trade relations."

Farmers for Free Trade was more downbeat. "Today’s news is a break in the clouds, but tariffs continue to cast a pall over the futures of farmers, ranchers and rural America. We hope both sides build on this progress to finally end the trade war.”