US-China trade war: The FIVE big gaps in the US-China trade deal

The US-China trade war is almost at an end after almost two years of rising hostility and tension after the USA President Donald Trump and Chinese Vice Premier Liu He have signed a deal seeking to calm trade frustrations. Express.co.uk explores the biggest gaps in the hard-fought trade deal.

The US and China signed the long-awaited “Phase One” trade on Wednesday after 18 months of trade conflict.

At the White House at the time of signing Donald Trump said: “The world is watching today, it’s a great honour to be here.”

China agreed to buy $200billion (£153bn) of US products over the next two years, including at least $32billion (£24.5bn) of extra agricultural products.

The Chinese Vice Premier told US business leaders: “The Phase-one deal will help maintain world peace, stability and prosperity.

“US and China can work together to achieve win-win relationship despite differences in politics, economic model.”

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What details have not made it into the deal?

1. Industrial subsidies and the Made in China 2025 programme.

The signed deal makes no mention of Beijing’s Made in China 2025 which is a strategic plan aimed at helping China move away from being the “world’s factory” and move to producing higher-value products and services.

President Trump and other industry leaders see the plan as a threat to its supremacy in the technology sector.

The deal also does not mention the subsidies that China gives to its state-owned enterprises.

These two issues are considered to be among the most contentious Mr Trump’s administration has with China.

Beijing maintains it does not unfairly subsidise its state-owned industries or companies, but the reality is China is not going to forgo dominance in these sectors so easily.

2. Enforcement and interpretation

The trade deal has outlined a dispute resolution process which requires China to begin consultations with the US once a complaint has been made, with the resolution being implemented by Beijing.

However, one large gap in this area is how the US will monitor enforcement.

The deal does not include importation about this and instead only mentions consultations.

There is also missing information about how each nation will interpret parts of the agreement.

Chinese state media has suggested the dispute resolution mechanism is not dictated by the US, which is different to Washington’s message.

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3. Huawei

Chinese telecoms giant Huawei was not referenced in the trade deal.

The US Treasury Secretary Steve Mnuchin said the company isn’t a “chess piece” in the negotiations.

This is a disappointment for Huawei and the Chinese as both of which have enraged by how Washington has linked the company’s fate to the relationship between the US and China.

The Chinese company became a symbol of the rivalry between the two nations with Washington lobbying nations, including the UK, not to use Huawei’s 5G technology.

It was alleged 5G service could be used by the Chinese government to spy on customers, which Huawei has vehemently denied.

4. Further reductions in tariffs

The new deal halves tariff rates on $120bn worth of goods, but most of the higher duties.

This will affect another $360bn of Chinese goods and more than $100bn worth of US exports which remain in place.

In terms of the tariffs, the deal does not have any information about a specific timeline for when the tariffs that are still in place will go down.

Reportedly average tariffs are currently around 20 percent higher on both sides compared to pre-trade war levels.

Overall, this is six times higher than when the dispute first began and means companies and consumers will bear the cost.

5. Access for foreign financial services firms

Some experts have said the deal does not ensure equal market access with enough certainty.

China has said it will open up its financial services sector and has permitted foreign companies to take larger stakes in Chinese firms, but Beijing is not giving up much by doing that, because China’s financial services sector is now dominated by domestic digital payment players.

If US firms have greater access for foreign financial services firms in China, it is unlikely they would be able to compete on the same level.

source: express.co.uk