Initial China Trade Deal Defuses Tensions, but U.S. Still Has Concerns

The pact broke ground politically, gaining the support of Democratic lawmakers and unions that have long derided existing trade agreements and perhaps forging a new bipartisan consensus on trade. But as with the China deal, the United-States-Mexico-Canada Agreement is more a modest improvement than a transformative overhaul to the economy.

In a note to clients, Gregory Daco, an economist at Oxford Economics, called the net economic benefits of U.S.M.C.A. “negligible,” but praised the deal for preventing a potential hit to the economy. The president had threatened to withdraw from NAFTA entirely if his trade pact was not advanced.

“The principal commercial benefit of both agreements appears to be the avoidance of what would have been self-inflicted harm — tariff escalation with China and termination of NAFTA,” said Michael J. Smart, a managing director at Rock Creek Global Advisors, an advisory firm.

The China deal also averts what would have been an economically damaging escalation of the trade war before the holiday season and the 2020 campaign. Mr. Trump had planned to slap 15 percent tariffs on shoes, laptops, toys and other goods on Sunday — a move that would have resulted in the United States taxing nearly Chinese import and likely inciting more retaliation from Beijing.

The United States has now collected more than $39 billion from the tariffs placed on $360 billion worth of Chinese goods, which Mr. Trump says China pays but economists say falls heavily on American businesses and consumers.

Robert Lighthizer, Mr. Trump’s top trade negotiator and one of the administration’s biggest China hawks, said in a briefing that China had made substantial commitments to increase purchases of American agriculture, energy, manufacturing and services products.

China’s farm purchases are expected to grow to at least $40 billion annually over a period of two years, while total exports of food, energy, manufactured goods and services to China will increase by a total of $200 billion, he said. The deal would increase protections for American intellectual property and end China’s practice of forcing American companies to transfer technology to Chinese partners. It would also open Chinese markets for financial services and American exports of beef, poultry, seafood, infant formula and pet food. Tariffs could go back in place if China fails to live up to its commitments, he said.

Article source: https://www.nytimes.com/2019/12/13/business/economy/china-trade-deal.html?emc=rss&partner=rss