China and US Reach Important First Step in Ending Trade War

The details of the agreement have drawn mixed reactions from US lawmakers. Top Democrats have accused Trump of bending too early. Republicans, however, hail the deal as a historic move forward. 

Trade War Details

The details of the agreement are somewhat complex. The US has officially canceled plans for new tariffs on $156 billion in imports of Chinese goods. Additionally, it will lower the tariff rate in half on another $120 billion in goods from 15% to 7.5%.

The U.S. and China reached a phase-one trade agreement, China's commerce vice minister says https://t.co/mfIeSThK3b

— The Wall Street Journal (@WSJ) December 13, 2019

For their part, the Chinese have agreed to raise farm product purchases to $40 billion per year. The increase would effectively quadruple farm-related sales in China, with $50 billion planned. Other exports would increase as much as $200 billion in the next four years.  While unclear as to the nature of the plan, the overall work of the agreement represents a step forward. Relations between the two nations have been strained to the extreme since May. At that time, President Trump imposed 25% tariffs on over $500 billion in Chinese-made products.  Many, however, have suggested that the agreement is simply a way for Trump to garner support from constituents. In particular, the middle American voting contingent is generally related to farming and will benefit from the agreement. 

Rebalancing Trade Issues

Others, however, have noted that the step is an important one for rebalancing trade issues. The US has little that China needs, and export requirements must include farm products because of the needs of both nations.  The agreement also represents a move in the right direction, according to the Trump administration. The cooling relations over the past eight months have seen China unwilling to budge on trade.  However, a hardline stance from the administration appears to have won the day. Even a small movement on trade agreements reveals that China is willing to come to the bargaining table. With a small win in the bag, larger wins could follow.  Others, though, feel that the agreement has little or no impact on the overall economic issues. Of note, the international finance manipulation only reveals the need for more decentralization.  The answer, according to these economists, is stability through international digital currencies. The advent of Bitcoin would ostensibly allow for international trade without the dangers of government interference. 

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