United States president Donald Trump has announced that the US and China were “very” close to a “big” trade deal which saw a rise in the US stocks after the announcement.
“They want it and so do we!” the US President wrote on his favourite announcement medium Twitter.
This announcement by Trump assumes great significance because the latest round of threatened import tariffs on Chinese goods into the US is set to come into force from December 15.
According to reports, negotiators of both the countries are trying hard to find a way to avoid the December tariffs and are trying to forge an interim deal – also being dubbed as ‘phase one’ deal, that could include a pledge for higher Chinese purchases of US agricultural products as well as a roll back of current tariffs by the US.
A trade deal with China was likely to be completed by the end of the year. Trump had said in October. However reports stated that more thorny issues – such as Chinese subsidies, will not be included in the so-called phase one deal and is likely to be discussed and addressed in next phase of the trade agreement.
However, since the October announcement, the two sides have continued to carry on with the negotiations without an end for an interim deal. This reportedly prompted Trump to issue threats of new tariffs on more than $150bn worth of Chinese exports starting 15 December this year.
There was a 1 per cent jump in the main US stock indexes following Trump’s latest announcement on the trade deal.
The two largest economies of the world have raised tariffs on more than $450bn worth of goods in annual trade since the start of the trade war more than two years ago.
Earlier rounds of US tariffs were devised largely to not impact the US consumer which is currently the main engine of growth for the US economy. However a wide range of everyday goods, including smartphones, children’s books, footwear and clothing, were included in this latest round of threatened tariffs.
If there is no interim trade deal between the US and China so that the next tariffs could be avoided and some of the tariffs already in place can be rolled back, the economic growth of the US next year would be a mere 0.4 per cent, estimates analysts at Goldman Sachs.
The risks have been downplayed by White House officials while also arguing that the US tariffs are aimed at making China give up “unfair” trade practices, such as alleged intellectual property theft.
Any interim deal with China could be a well waited victory for Trump because currently he is under pressure because of an impeachment processes ongoing against him by US Democrats.
However, Jennifer Hillman, a senior fellow at the Council on Foreign Relations and a former trade official, said that the potential agreement under discussion falls short of what the US initially.
“This should NOT be described as a trade agreement,” she wrote on Twitter. “It is a purchase and sale agreement that does virtually nothing to address substantive concerns of US (+rest of the world) with China’s trade practices.”
(Adapted from BBC.com)