U.S. Reaches Temporary Trade Agreement With China, Won't Increase Tariffs to 25%—Yet
At the G-20 summit in Argentina, President Trump and Chinese President Xi Jinping reached an agreement that will put a temporary hold on U.S. plans to increase tariffs on Chinese goods from 10 percent to 25 percent. The two countries will have 90 days from Jan. 1, 2019, to negotiate a long-term agreement. If they can't, the 25 percent increase will go into effect.
"President Trump and President Xi have agreed to immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture," the White House said in a statement. "Both parties agree that they will endeavor to have this transaction completed within the next 90 days. If at the end of this period of time, the parties are unable to reach an agreement, the 10 percent tariffs will be raised to 25 percent.
As part of the truce, China said it will buy a "very substantial" (but not specified) amount of industrial, agricultural and other products to help ease the trade imbalance with the U.S., the White House said. President Trump announced on Twitter this morning that China would also ease tariffs on vehicle imports from the U.S.:
China has agreed to reduce and remove tariffs on cars coming into China from the U.S. Currently the tariff is 40%.
— Donald J. Trump (@realDonaldTrump) December 3, 2018
The U.S. already has in place a 10 percent tariff on $200 billion in Chinese goods. That includes a large number of finished goods and raw materials that relate directly to the promotional products industry. Uncertainty around the tariffs—how long they'll last, how high they'll go, how wide in scope—has left many promo businesses scrambling to figure out exactly what the pricing impacts will be for the industry. In July, President Trump said he'd be willing to place tariffs on all $505.5 billion in U.S. imports from China, before announcing in August the now-delayed 25 percent increase.
For now, at least, there's a measure of stability as the U.S. and China enter the 90-day negotiation period. Global stock markets surged as a result of the news, and President Trump seemed optimistic about the deal.
"This was an amazing and productive meeting with unlimited possibilities for both the United States and China," he said, according to the White House statement. "It is my great honor to be working with President Xi."
Whether that's just posturing or an indicator that real progress is imminent, it's hard to say. We'll have 90 days to find out.