China has agreed to purchase hundreds of billions of dollars worth of products from the United States as part of its “phase one” trade deal.
The agreement signed Wednesday predicts that Beijing will purchase an additional $ 200 billion in US goods and services over the next two years.
The increase in purchases will be compared to 2017, before the start of the trade war. China imported more than $ 185 billion in US goods and services in total that year.
In return, Washington agreed to cut tariffs on $ 120 billion worth of Chinese goods from 15% to 7.5%.
Overall, staggered purchases from China would lead to a sharp increase in US exports. Total exports to China would increase to more than $ 260 billion in 2020, and to about $ 310 billion in 2021 if the deal continues.
“We think it is very difficult for China to import more than $ 200 billion worth of goods and services from the United States over the next two years without reducing imports from elsewhere,” analysts said. UBS.
Agricultural products represent a large part of new purchases. Under the agreement, China will purchase an additional $ 12.5 billion in these goods in the first year, and then $ 19.5 billion in the second year, compared to 2017.
Among the products she has promised to buy are soy, pork, cotton and wheat. The soybean and pork trade in particular has been hit hard by escalating tensions between the two largest economies in the world.
The two products were among thousands of U.S. goods hit by Chinese tariffs in July 2018, in response to Trump administration taxes on $ 34 billion in Chinese goods.
In addition to the purchases announced on Wednesday, the initial agreement offers better protection to American companies that have long complained about the theft of their intellectual property and their trade secrets.
It also eases the requirements for banks wishing to operate in China and imposes anti-counterfeiting measures which, if not respected, would result in sanctions.
Beijing’s promises go further than China in the past, but the deal does not require the government to change laws or regulations.
And China has still not lost ground on some of the most important issues for America, such as requests for cuts in government subsidies that could trigger a fundamental overhaul of the functioning of the Chinese economy. It is among several points of friction that the two parties should discuss for the next phase of the agreement.
For now, the deal is expected to provide some relief to Chinese manufacturers, who have suffered from tariffs that have made their products more expensive. It also takes away some of the uncertainty that had clouded corporate decisions to invest in China.
In addition, the agreement fits perfectly into one of Beijing’s main objectives: to diversify its economy and reform its financial system. China’s central bank said in a statement on Thursday that the deal would help it continue to open up the country’s financial sector.
In the future, a senior US administration official told reporters that Washington will actively monitor the two countries’ data sources to ensure that China keeps its promise.
– Donna Borak and Laura He of CNN contributed to this report.