US and China make tentative trade deal, but doubts continue

Legislation | 16 October 2019

An already shaky deal between the US and China is having its foundations further tested.


After the US and China appeared to make progress towards a tentative trade agreement last week, hopes had been raised that there may be an end in sight to the tensions that have rumbled on since the start of the year.

However, doubts have already been expressed that even this step forward may quickly be reneged upon amid suggestions that Beijing needs more time for talks.

US president Donald Trump announced amid much fanfare last Friday (October 11th 2019) that a partial deal had been made and that a planned tariff increase on billions of dollars' worth of Chinese goods set to come into effect yesterday would now not go ahead.

He also revealed that China had promised to increase its purchases of US agricultural products to double the amount sold in 2017.

This agreement was meant to provide a reprieve for both countries as they sought a more comprehensive deal, which would come into effect over three stages, Mr Trump suggested.

US treasury secretary Steven Mnuchin also said he was confident following the discussions that a real deal could be made in the not-too-distant future.

However, less than a week later, there are concerns an agreement may still not come to fruition. Chinese state-owned newspaper China Daily said although it had found the talks "encouraging", a "partial deal, if inked, doesn't mean the trade row has been settled once and for all".

Bloomberg has also reported that Beijing wants discussions before the end of October to smooth out what is being called 'Phase 1', but no meeting has been planned.

Furthermore, China has previously made similar promises and failed to follow through - although another China Daily article suggested the Asian nation is more worried about the White House doing this than the other way round.

"Based on its past records, Washington may at any time decide to cancel the agreement if it thinks the cancellation served its interest best," it commented.

The fact that no mention has been made of tariffs planned for December, or on financial regulation and currency, are other factors leading to gloomy comments from analysts.

"We do not believe that this limited agreement materially reduces the fundamental uncertainties regarding the US-China economic relationship. We continue to expect US-China trade tensions to re-emerge as non-trade issues worsen and the two sides fail to make real progress on fundamental differences," a report from Japanese financial services firm Nomura stated.