- President Donald Trump touted a new trade agreement with the Chinese government on Monday, saying the deal would decrease trade tensions.
- The deal includes very few specifics aside from the delay of US tariffs on Chinese goods.
- Treasury Secretary Steven Mnuchin said details were still being worked out.
- Stock markets reacted favourably to the news.
President Donald Trump on Monday touted the outlines of an agreement between the US and China to reduce trade tensions between the two countries, painting the agreement as a major win for the US.
“China has agreed to buy massive amounts of ADDITIONAL Farm/Agricultural Products – would be one of the best things to happen to our farmers in many years!” Trump said.
Analysts and even Trump’s supporters critiqued the parameters, which so far remain vague. It’s unclear, for instance, how China’s promised increased purchases of US goods will be executed. But markets reacted favourably to the developments, with the Dow Jones industrial average surging more than 360 points by mid-morning.
Treasury Secretary Steven Mnuchin, who led the US delegation in the talks, said Monday during an interview on CNBC that the details were still being worked out.
“This is not a giant purchase order government to government – we now have to execute on this, and China has to execute on this,” Mnuchin said.
Larry Kudlow, Trump’s top economic adviser, also stressed that the deal was a preliminary agreement and there were many details to work out.
“This is not some term sheet for a corporate finance deal,” Kudlow said during a CNBC interview. “This is a very complicated deal for the two most complex economies in the world.”
Based on statements from the White House and other administration officials, here’s what we know about the deal so far:
- The US will put on hold tariffs on $US150 billion worth of Chinese goods: Mnuchin said the tariffs, which were imposed as punishment for alleged Chinese theft of US intellectual property, were “suspended” but could be reimposed.
- China promised to increase purchases of US agricultural and energy products: Mnuchin told Fox News on Sunday that China would increase its purchases of US agricultural products by 35% to 40% over the next year, but he did not offer details. Commerce Secretary Wilbur Ross will work out those details during a future trip to China, Mnuchin said.
- China promised to “substantially reduce the United States trade deficit in goods with China”: The US runs a $US375 billion annual goods trade deficit with China, its largest such imbalance with any country. Chinese officials say that would be done by increasing imports of US goods to China.
Mnuchin also said the two sides discussed increasing trade in other categories and the possibility of China overhauling some of its trade policies.
Greg Valliere, the chief global strategist at Horizon Investments, said the lack of specifics beyond a delay in tariffs was proof the US was simply trying to get something on paper.
“The US capitulation this weekend was stunning – while agreeing to put tariffs on hold, the US didn’t seek any specific penalties for China’s pervasive intellectual property theft; there was no specific dollar amount cited in vague pledges of trade reforms; there were no curbs on Chinese investment in the US,” Valliere wrote in a note to clients Monday.
Derek Scissors, a resident scholar at the American Enterprise Institute who has occasionally advised Trump on trade, blasted the deal on Monday. Scissors said the agreement was full of empty promises and would do little to stem China’s theft of US intellectual property.
“The vague-to-the-point-of-useless deal and complete absence of American action could have been pulled straight from the Obama or Bush administrations,” Scissors wrote. “Secretary Mnuchin is perfectly imitating former Treasury Secretaries Lew, Geithner, and Paulson, who led us here.”
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