WASHINGTON -- The U.S. and China reached a truce in their trade war Friday, with President Donald Trump boasting of a "substantial phase 1 deal" after meeting with top negotiator Vice Premier Liu He at the White House.
The U.S. will not raise tariffs on Chinese goods as planned Tuesday in return for a major increase in farm product purchases by the Chinese side.
The two sides are "very close" to ending their trade war, and it will take up to five weeks to get the deal written, Trump said, speaking to reporters after the talks with Liu. Trump is planning to meet Chinese President Xi Jinping in Chile next month.
Negotiations on phase 2 will begin immediately after concluding phase 1, Trump said.
"We have made substantial progress in many fields," Liu said. "We are happy about it."
U.S. Treasury Secretary Steven Mnuchin told reporters Trump had agreed not to proceed with a hike in tariffs to 30% from 25% on about $250 billion in Chinese goods that was supposed to have gone into effect on Tuesday.
But U.S. Trade Representative Robert Lighthizer said Trump had not made a decision about a new round of tariffs on the remainder of Chinese goods that are planned to go into effect in December.
The issues the two sides agreed to on Friday are limited to specific areas, such as agriculture and intellectual property. China will purchase between $40 billion and $50 billion of American farm products and will ensure transparency in its currency policy, which have come under fire from the U.S. as intentional weakening of the yuan.
China has also agreed to open up its financial market and on measures to prevent forced technology transfers, the U.S. side said.
The Dow Jones Industrial Average closed 317 points higher at 26,814.45. The Dow had initially risen over 500 points at the news of a partial trade deal, but the gains quickly shrunk as the details of the agreement emerged.
"This is still a fairly narrow agreement," said Michael Hirson, practice head of China and Northeast Asia at New York-based Eurasia Group.
"It is not clear if China has more flexibility to make concessions than when talks broke down in May," Hirson said.
The trade talks hit a roadblock that month when China sent back to Washington a substantially trimmed down draft of the deal, signaling that they were not willing to compromise on sensitive issues such as state subsidies to their industries.
Hirson said the two sides ultimately may not get through to phase 2. "There needs to be major political concessions on both sides to advance from here," he said. "They may find it more comfortable staying at this."
Trump had expressed optimism on Twitter Friday morning. "Good things are happening at China Trade Talk Meeting," he wrote. "Warmer feelings than in recent past, more like the Old Days."
China has already signed to purchase large amounts of American soybeans and pork, according to Commerce Ministry spokesperson Gao Feng. Liu likely outlined plans for stepped-up imports from the U.S. at Thursday's meeting.
Chinese central bank chief Yi Gang also attended the trade talks. Yi is believed to have presented a plan for improved transparency in China's currency interventions Thursday.
A further escalation of the trade war will slice 2% off China's real gross domestic product and 0.6% of U.S. real GDP in 2020, the International Monetary Fund said in a forecast released Friday.
Left unchecked, the conflict could further slow investment and trade as well as hurt financial market sentiment, the IMF previously warned.
Takeshi Kawanami in Washington and Ken Moriyasu in New York contributed to this report.