Oct 14, 2019

US-China "Phase 1" Pact: Trade War Turning Point, or Just Getting Our Hopes Up?

Frank Fuhrig Staff writer

The US and China have agreed in principle on a preliminary trade pact.

After a White House meeting Friday with Chinese Vice Premier Liu He, President Donald Trump called it a "very substantial phase one deal." Details were scant, but China promised to buy at least $40 billion dollars in agricultural products, while Trump froze another tranche of tariffs that were due to take effect next week on a large swath of Chinese exports.

Mercatus Center trade economist Christine McDaniel called the announcement "good news" amid what has been an escalating tariff war between Washington and Beijing:

"We will wait to see if it sticks, and how soon 'phase two' will start. But at least there is a pause on more tariffs, and there are signals that each side may be willing to come to the table to move forward. Trump seems to be willing to take a tariff breather, and meanwhile China has been moving forward with opening its financial sector.

"It has been easy to get caught up in the rhetoric lately on 'getting tough with China,' and some observers even foresee a 'decoupling from China.' But businesses on the ground in China are in no way ready to entirely abandon that market, as we heard Ker Gibbs, president of the American Chamber of Commerce in Shanghai, indicate recently. So whether this is a turning point to sustainable reforms and a deal, or just another case of getting our hopes up, these two large economies are going to have to figure out how to co-exist in the global economy."

McDaniel is a senior research fellow focused on international trade, globalization and intellectual property rights. 

Photo by Win McNamee/Getty Images

Support Mercatus

Your support allows us to continue bridging the gap between academic ideas and real-world policy solutions.Donate