In a year full of stops and starts, false dawns and setbacks, it appears the world’s top two economic superpowers could have some form of a partial trade deal on the table.
According to Bloomberg, the tentative agreement would avert the imposition of approximately $160 billion in tariffs on Chinese goods in exchange for Chinese pledges to purchase more U.S. agricultural goods.
“Getting VERY close to a BIG DEAL with China,” Trump tweeted Thursday morning, sending stocks soaring. “They want it, and so do we!”
Talks between the two countries picked back up in October and have continued since. That same month, Trump outlined a potential phase one deal, but said the two side still had to work out details in the ensuing weeks.
In August 2017, the United States Trade Representative launched its Section 301 investigation into alleged Chinese trade practices, including forced technology transfers and intellectual property theft, among other U.S. grievances.
In 2018, the Trump administration rolled out initial tariff tranches of $34 billion and $16 billion. Those tranches were followed by an additional $200 billion in tariffs last September.
The Trump administration’s fourth tariff list encompassed $300 billion worth of Chinese goods —including a wide variety of common consumer goods, from toys to washing machines — at a 10% rate. Those tariffs were scheduled to go into effect Sept. 1; however, some of those tariffs were eventually delayed, leading to Sunday’s Dec. 15 deadline.
Through the first 10 months of the year, the U.S. has a trade in goods deficit of $294.5 billion with China, with exports worth $87.6 billion and imports worth $382.1 billion, according to Census Bureau data. The U.S. deficit with China came in at $419.5 billion in 2019.
The exact details of the reported agreement remain to be seen, particularly in light of the often topsy-turvy, back-and-forth nature of the negotiations to date; a deal in principle today might not be one tomorrow. In fact, during the NATO summit last week in London, Trump mused it might be better to wait to sign a deal until after the 2020 elections.
Nonetheless, the news marks another milestone in a busy week of trade news.
Earlier this week, the White House and House Democrats announced an agreement on revisions to the United States-Mexico-Canada Agreement (USMCA), the proposed successor to the North American Free Trade Agreement (NAFTA).
Stocks reacted positively to the U.S.-China trade news Thursday.
The S&P 500 index closed up 0.9% to 3,168.57. The NASDAQ Composite closed up 0.7% to 8,717.32, while the Dow Jones Industrial Average closed up 0.8% to 28,132.05.