The Agriculture chapter addresses structural trade barriers and will support a dramatic expansion of U.S. food, agricultural, and seafood exports, increasing U.S. farm and fisheries incomes, creating stronger rural economic activity, and promoting job growth. Various non-tariff barriers to U.S. agricultural and seafood trade are being eliminated, including meat, poultry, seafood, rice, dairy, infant formula, horticultural products, food and feed additives, pet food, and agricultural biotechnology products. SHANGHAI – Just days before the coronavirus crippled the Chinese city of Wuhan and changed the world, the Trump administration and China signed what both sides called a temporary truce in their 18-month trade war. U.S. tariffs of 25% on $250 billion of Previously imposed Chinese goods remain unchanged immediately. These could be withdrawn as part of a Phase 2 trade negotiation, the United States. Treasury Secretary Steven Mnuchin said Wednesday. Under the agreement, China has committed to buying as much as $63.9 billion of covered goods from the United States by the end of 2020 compared to those underlyings in 2017. The definition of the baseline for 2017 using Chinese import statistics implies a purchase target of $173.1 billion for 2020 (red in panel a).

Setting the baseline for 2017 using U.S. export statistics implies a target of $159.0 billion for 2020 (in blue in panel a). The deal failed to stop many of the same practices that sparked the trade war, the largest in history. That doesn`t stop China from injecting huge subsidies into a number of industries — from electric cars to airliners to computer chips — that could shape the future, but for which the country often relies heavily on U.S. technology. “China is not violating this Phase 1 agreement,” he said. How to cite this article: Hunter L. Clark, “An Update on the U.S. – China Phase One Trade Deal,” Federal Reserve Bank of New York Liberty Street Economics, October 6, 2021, libertystreeteconomics.newyorkfed.org/2021/10/an-update-on-the-us-china-phase-one-trade-deal.html.

Although some provisions expire at the end of the year, the agreement contains permanent requirements, such as the need for China to stop forcing foreign companies to transfer technology to Chinese companies in order to do business there. An obscure clause also calls on China to buy increasing quantities of U.S. products by 2025. How do these arguments resist now? The authors of the previous article discussed trade creation issues in relation to trade diversion and feedback on commodity markets: There would be no impact on U.S. growth if “additional” exports to China were simply offset by a decline in exports to other countries or a decline in sales in the U.S. market, this could lead to an increase in imports from other countries. The benefit to U.S. commodity producers would also be mitigated if Chinese demand for U.S. energy products led to an increase in supply from other producers, which would drive down prices. A senior Trump administration official said the monetary deal is based on provisions in the U.S.-Mexico-Canada trade agreement that require the three countries to disclose monthly data on international reserve assets and foreign exchange market interventions, as well as quarterly balance of payments data and other public reports to the International Monetary Fund.

If this intransigence continues, Phase 1 could set the trade rules for the coming years. At first glance, the Phase 1 trade deal missed the Trump administration`s goals. The administration had hoped the negotiations would offset the huge trade imbalance between the two countries and reduce Chinese subsidies, which U.S. companies and officials see as huge competitors to state-funded U.S. industry. One of the overall objectives of Phase One was to reduce the U.S. trade deficit in goods. As many analysts had anticipated, the imposition of tariffs on China and other countries, as well as the purchase commitments in the Phase One agreement, had little lasting impact on the U.S. trade deficit.

As the red line in the chart below shows, the U.S. trade deficit with the world has increased despite numerous tariffs imposed on China and other countries. Even with China itself, the impact on the trade balance has not been great. As the dotted blue line in the chart below shows, the reported deficit with China has narrowed somewhat. .

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