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Washington, Beijing sign 'momentous' trade deal

AFP: After nearly two years of conflict between the world's two dominant economic powers, the United States and China signed a trade truce on Wednesday, letting businesses around the globe breathe a sigh of relief.

US President Donald Trump, who currently faces an impeachment trial and then a tough reelection bid later this year, called the agreement "momentous."

But tariffs on hundreds of billions of dollars in imports remain in place, leaving American consumers and businesses to foot the bill.

The "phase one" agreement includes pledges from China to beef up purchases of American crops and other exports, provides protections for US technology, and new enforcement mechanisms.

"Today, we take a momentous step, one that's never taken before with China," that will ensure "fair and reciprocal trade," Trump said at the White House signing ceremony.

"Together, we are righting the wrongs of the past."

As Trump ambled through a lengthy commentary on the deal, punctuated by introductions of many officials involved in the negotiations, major networks switched away from the White House to the Congress to show the presentation of articles of impeachment in the Senate as the first step towards a trial.

The easing of US-China trade frictions has boosted stock markets worldwide in recent weeks, as it takes the threat of new tariffs off the table for now.

Trump signed the deal with China's Vice Premier Liu He, who has led Beijing's negotiations with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.

Trump also thanked Chinese leader Xi Jinping and said he would visit China in "the not-too-distant future."

"Negotiations were tough on us," Trump said, but they led "to this really incredible breakthrough."

But he said he will only remove tariffs "if we're able to do phase two."

"I'm leaving them on. Otherwise we have no cards to negotiate with."

In a letter to Trump read by Liu, the Chinese leader said the deal is "good for China, for the US and for the whole world."
The centrepiece of the deal is a pledge by China to purchase at least an additional $200 billion worth of US farm products and other goods and services over two years, over a baseline of $186 billion in purchases in 2017.

The deal would include $50 billion in additional orders for US agricultural products, Mr Trump said, adding he was confident that US farmers would be able to meet the greater demand.

He also said China would buy $40 billion to $50 billion in additional US services, $75 billion more in manufacturing goods, and $50 billion more worth of energy supplies.

Officials from both countries have touted the deal as ushering in a new era for US-Sino relations, but it fails to address many of the structural differences that led the Trump administration to start the trade war in the first place.

They include Beijing’s longstanding practice of propping up state-owned companies, and flooding international markets with low-priced goods.

Mr Trump, who has embraced an “America First” policy aimed at rebalancing global trade in favour of US companies and workers, said China had pledged action to confront the problem of pirated or counterfeited goods, and that the deal included strong protection of intellectual property rights.

Earlier, top White House economic adviser Larry Kudlow told Fox News the agreement would add 0.5 percentage point to US gross domestic product growth in both 2020 and 2021.

But some analysts have expressed scepticism it will set US.-China trade on a new trajectory.

“I find a radical shift in Chinese spending unlikely. I have low expectations for meeting stated goals,” said Jim Paulsen, chief investment strategist at Leuthold Group in Minneapolis. “But I do think the whole negotiation has moved the football forward for both the U.S. and China.”

The Phase 1 deal, reached in December, cancelled planned US tariffs on Chinese-made cellphones, toys and laptop computers and halved the tariff rate to 7.5% on about $120 billion worth of other Chinese goods, including flat panel televisions, Bluetooth headphones and footwear.

But it will leave in place 25 per cent tariffs on a vast, $250 billion array of Chinese industrial goods and components used by U.S. manufacturers.

Mr Trump, who has been touting the Phase 1 deal as a pillar of his 2020 re-election campaign said he would agree to remove the remaining tariffs once the two sides had negotiated a “Phase 2” agreement. He added that those negotiations would start soon.

He also said he would visit China in the not-too-distant future.

But the new deal has also restores a twice-yearly dialogue process that previous administrations conducted regularly but that Trump scrapped. AFP

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