WASHINGTON/BEIJING -- It was only months ago that the world's two-largest economies seemed headed toward an open trade war. Now China has agreed to import American beef and financial services in exchange for Washington's assistance on building an economic zone stretching to Europe and Africa.
'More than in all history'
"This is more than has been done in the whole history of U.S.-China relations on trade," U.S. Commerce Secretary Wilbur Ross said Thursday, calling the details of the trade deal revealed that day a "herculean accomplishment."
The 10-point initial agreement is part of a 100-day plan to resolve trade imbalances reached by Presidents Donald Trump and Xi Jinping during their summit early last month. The deal fully lifts the Chinese ban on U.S. beef enacted due to fears of mad cow disease. It also grants more access to American credit rating agencies, bond underwriters and other financial service businesses.
Meanwhile, the U.S. will support Chinese procurement of liquefied natural gas and send representatives to attend China's Belt and Road Forum in Beijing, which begins Sunday. The Belt and Road Initiative refers to a plan to create an economic zone stretching all the way to Europe and Africa by land and sea.
It took much less than 100 days to produce these results since the Trump-Xi summit wrapped up April 7, an outcome seen as in line with both sides' expectations. Eliminating trade imbalances was one of Trump's premier promises on the 2016 campaign trail. He also needed a diplomatic victory to distract from the cloud surrounding his abrupt dismissal of his FBI chief, James Comey.
Candidate Trump promised to label China as a currency manipulator and slap a 45% retaliatory tariff on the country's exports. But the two sides have been finding common ground on North Korea, and now they are deepening economic ties as well.
China the real winner?
Beijing also has much to gain. For one, the arrangement upends the idea that the U.S. and China will launch a trade war, Vice Commerce Minister Yu Jianhua said Friday.
For Xi, a stable bilateral relationship is the top foreign policy priority heading into this fall's twice-a-decade Communist Party congress. Not only did he achieve visible progress on that front, he also brought Washington on board his Belt and Road Initiative.
The opening of the mainland China market to U.S. beef and financial services may seem like a painful concession at first glance, but China may in fact have gotten the better part of the deal. Beijing had already decided to lift the import ban on American beef in September, before Trump was elected. All China did was save the initiation of imports for the next administration.
The opening of the bond market could bring in U.S. institutional investors, which may stem the capital flight that troubles the Chinese government.
Still just a beginning
Beijing and Washington also said Thursday that they will open a comprehensive economic dialogue this summer with the aim of working out a yearlong plan. The current agreement does not address China's dumping of excess steel and other areas of concern in Washington.
American beef and LNG exports alone will do little to close the trade deficit against China, which has ballooned well past $300 billion for each of the past few years. Ross said coming trade negotiations will touch on at least 500 points.
Japan and the U.S. also held economic talks last month in Tokyo. There, the Americans had also wanted a preliminary 100-day plan, but the Japanese apparently refused. Later, Ross said the U.S. "can no longer sustain" the swollen trade deficit with Japan.
But with China, which accounts for half of America's trade deficit, Washington is now assuming a starkly different attitude. Ross's Department of Commerce predicts that the gap will improve within the year. If the two titans become more allied economically, that could also affect the bilateral free trade agreement the U.S. seeks to forge with Japan.