Temporary cease-fires and false dawns have punctuated the 19-month-long trade war between China and the United States, only to dissipate with a sudden setback in negotiations, or a tweet from U.S. President Donald Trump that dialed up the heat on China while chilling global markets. And so the world heaved a sigh of relief when the two sides announced Phase I of a trade deal in December, the first step toward a negotiated peace.
Predictably, the Trump administration claimed a major victory, calling the deal “historic.” The Chinese side offered a positive spin of its own, noting that the deal would promote high-quality growth and facilitate necessary economic restructuring. As part of the deal, the United States agreed to cancel the 15-percent tariffs that had been scheduled to take effect on December 15 on $160 billion worth of Chinese goods, and to halve an earlier set of tariffs on another $120 billion worth of goods. In exchange, China agreed to increase its purchase of U.S. products by $200 billion in the next two years.
Beyond these accomplishments, however, the victory rings hollow for both sides. The December agreement doesn’t mark a major breakthrough, nor does it come anywhere close to resolving the real contentious issues that separate the two countries. To reach the next phase will require each side to determine what fundamental concessions it might be willing to offer the other. But in the interests of Chinese and American prosperity—not to mention the health of the global economy—negotiators must find a way to come to a compromise.
THE MIRAGE OF A BREAKTHROUGH
The Phase I agreement doesn’t substantially bridge the impasse between the United States and China. Trump’s 25 percent tariffs on $250 billion of Chinese imports will remain, as will China’s retaliatory tariffs on U.S. goods. Washington presented several Chinese pledges as concessions to U.S. concerns about Beijing’s trade practices. But these promised measures are either vague or extensions of policies already in place. Indeed, China had initiated most,
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