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Trade war

US and China reach trade-war ceasefire, but the devil is in details

Gaps emerge over specifics on tariffs and agricultural purchases

The U.S. says China has committed to increasing its imports of U.S. goods and services by $200 billion over the two next years, but Beijing is mum on specifics.   © Reuters

WASHINGTON/BEIJING -- The optimism in the financial market and industry over the first-stage trade deal between the U.S. and China could be short-lived, with Washington and Beijing offering different takes on what was actually agreed on, including the handling of tariffs and amount of agricultural purchases.

The phase one deal means a de-escalation of the current tariff war, but with the actual signing of the document not taking place at least until January, disputes could still rekindle between the world's two largest economies, taking the stock market on a roller coaster ride. 

At a news conference Friday in Beijing, China's vice minister for finance, Liao Min, stressed the significance of the deal, saying the U.S. has agreed to "cancel" part of the imposed tariffs. But U.S. President Donald Trump immediately disputed this. "The 25% Tariffs will remain as is, with 7 1/2% put on much of the remainder...," Trump said in a tweet, stressing that only the scheduled tariffs will be abandoned and the remaining levies will become leverage for negotiations for a phase two deal.

In addition to canceling 15% tariffs on $160 billion worth of goods slated to kick in on Sunday, 15% duties on $120 billion in Chinese imports imposed Sept. 1 will be halved to 7.5%, according to a statement from the Office of the U.S. Trade Representative. The previous three rounds of tariffs will remain in effect.

Still China repeated that the U.S. has promised to gradually cancel the tariffs. 

White House sources had said both sides were negotiating a complete removal the tariffs imposed in September. That the actual agreement settled for only a reduction seems to indicate both countries wanted a quick deal rather than finalizing the details. 

Similarly, Washington and Beijing do not seem to be exactly on the same page on shrinking the U.S. trade deficit with China, Trump's main goal. China has committed to increasing its imports of U.S. goods and services by $200 billion over the two next years, the USTR says. A high-ranking U.S. official said agricultural imports will increase to an annual $40 billion from $24 billion in 2017. 

But the Chinese side avoided mentioning concrete numbers. Ning Jizhe, the vice chairman of the National Development and Reform Commission, said the exact amount of import increases will be announced later. 

As for the signing of the document, U.S. Trade Representative Robert Lighthizer said the deal will be inked at the ministerial level in the first week of January. But China only said the timing will decided after a legal review and translation are completed. 

The Chinese government said the phase one deal covers nine areas, but the fact sheet released by the USTR outlining the agreements shows only seven areas. And the areas included in the agreement, such as technology transfer, lack specifics. China's structural reforms, such as industrial subsidies, remain untouched. 

Trump said phase-two talks will begin immediately instead of waiting after the 2020 election. But Liao did not offer any promise, saying Beijing will first assess whether the initial agreement is duly implemented. On the Chinese internet, posts comparing U.S. and Chinese trade announcements have all been deleted. Lighthizer has acknowledged uncertainty over the Chinese commitment to the deal. 

Reducing the current tariffs will help the slowing Chinese economy, and companies concerned about disruptions in U.S.-China supply chains could resume investment. But the reaction on the stock market was relatively muted, with the Dow Jones Industrial Average closing with a tepid 3 point rise on Friday.

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