The U.S. and China paused their nearly two-year trade conflict Jan. 15 with the signing of a "phase one" agreement that includes Beijing's pledge to purchase more than $200 billion of additional American products and services over the next two years.
Under the interim trade deal, China would purchase about $50 billion of agricultural goods from the U.S., President Donald Trump said at the White House. China also agreed to buy $75 billion worth of manufactured goods, $50 billion of energy products and $40 billion to $50 billion worth of services including from the financial industry.
"Today we take a momentous step, one that has never been taken before with China toward a future of fair and reciprocal trade with China," Trump said.
Trump said tariffs imposed on some Chinese goods would remain in place to provide the U.S. with leverage in the negotiations for a "phase two" trade deal. "They will come off as soon as we finish phase two," he said.
The trade deal includes China's commitment to take "firm action" on counterfeit goods and introduces "powerful restrictions" on currency devaluation, Trump said. It also puts an end to forced technology transfers and addresses issues on intellectual property protection and enforcement, according to Trump and pool reports.
Trump said the talks for the phase two agreement would begin once the phase one deal takes effect. The president said he would visit China "in the not-too-distant future."
Stocks gained as the signing ceremony took place in Washington. The S&P 500 index and the Dow Jones Industrial Average were both up 0.4% shortly before 1 p.m. ET.
The agricultural and manufactured goods covered by China's purchase commitments include soybeans, cotton, grains, meats, seafood, industrial machinery, electrical equipment, aircraft, vehicles, and iron and steel. The energy products include liquefied natural gas, crude oil and metallurgical coal.
Technology transfer, financial services
The U.S. and China agreed to prohibit the pressuring of foreign companies to transfer their technology as a condition for market access and government approvals, according to the text of the trade pact. The deal says technology transfers or licensing would be "based on market terms that are voluntary and reflect mutual agreement."
As part of the trade deal, China agreed to remove by April 1 the foreign equity cap for securities companies; fund management companies; and life, health and pension insurance providers.
China would also remove "discriminatory" regulatory requirements and processes in all insurance services sectors and eliminate barriers for credit rating service companies. The country also agreed to expand opportunities for branches of U.S. banks.
The phase one deal is a "fragile truce" that could prevent a further escalation of trade tensions ahead of the U.S. presidential election, Oxford Economics said in a note, cautioning that policy uncertainty would remain high as long as the long-term U.S.-China relationship remains unclear.
"Deeper structural tensions concerning industrial subsidies, technology rivalry, and other non-tariff barriers risk further decoupling in 2020," Oxford Economics wrote, adding that the interim trade deal would reduce the trade conflict's drag on real GDP growth in 2020 only to 0.1 percentage point from 0.2 percentage point.
Ahead of the phase one deal signing, the U.S. agreed with the EU and Japan on proposed changes to existing international rules on industrial state subsidies, in an apparent jab at China.