Trade relations between the US and China finally appear to be heading in a positive direction as the Trump administration reversed its move to officially designate Beijing as a currency manipulator. This is one of several measures taken by both sides just days before they sign what has been dubbed the “phase one” of a new trade deal.
According to this agreement, China will buy more agricultural goods – up to $ 40 billion per year from the previous high of $ 27 billion – and crack down on intellectual property thefts. The $ 40 billion figure has been a key point from President Trump’s side as he has promised this boost to his voters from the farming industry, but experts question whether China can actually manage to import these vast sums without oversupplying its markets.
Intellectual property rights have taken centre stage as both countries compete for supremacy in the international technological market. Advancements in Artificial Intelligence and 5G and their strategic capabilities entails that the US wants the ability to be able to raise its grievances against China in the event of any perceived misconduct. Having said that, this clause in the trade deal has also been touted by many as too weak from the US perspective, which questions exactly what progress the Trump Administration really made in its efforts to get ‘more’ out of this bilateral trade relationship.
For China, the boon will be seeing the tariffs currently imposed by the US cut to half, alongside an agreement to not impose any additional import taxes. Whether both sides manage to hold up their end of the bargain remains to be seen – the deal isn’t really enforceable in any way – but the reception to this treaty has been positive internationally. This is an end – or at least a pause – to the trade war, which has been ongoing since 2018. Global markets will not have to consistently manage expectations and look to anticipate how either country will retaliate. We can only hope that this peace between the two trading rivals lasts.