Trump announces limited trade deal with China

President Trump on Friday said he and Chinese Vice Premier Liu He had agreed on a limited trade deal that would ease the ongoing trade war between the world’s two largest economies and potentially set the stage for a more significant deal down the road.

"We've come to a very substantial phase one deal," Trump told reporters following the meeting.

The principles of the deal, which Trump said would be written over the next three weeks, covers financial services, agriculture, and some intellectual property issues. Trump suggested he could sign the deal next month when he and Chinese President Xi Jinping will be in Chile for the Asia-Pacific Economic Cooperation (APEC) meetings. Negotiations on a second phase, he added, would continue after the signing of the first phase.

As part of the deal, Trump would suspend a scheduled 5 percentage point tariff increase on $250 billion of Chinese imports due to go into effect on Tuesday. The fate of a new set of 15 percent tariffs scheduled to go into effect on $156 billion of Chinese imports in mid-December remained unclear.

China agreed to buy $40 to $50 billion in agricultural products, relieving pressure on farmers, a key constituency that has suffered under the ongoing trade war.

But the deal must still be written and signed by both parties, and it steered clear of broader issues Trump hoped to address when he embarked on the trade war last year, including broader intellectual property issues, forced technology transfer and massive Chinese industrial subsidies.

Overnight, China announced a timeline to allow greater foreign ownership of Chinese financial firms.

Reports leading up to Friday’s meeting signaling the possibility of a partial deal with China caused markets to spike, a sign of optimism leading into Trump’s Oval Office meeting Liu. Trump expressed optimism in a series of tweets earlier Friday.

Markets dipped slightly upon news of the limited agreement.

Trade experts had been pessimistic that the discussions would lead to a comprehensive agreement and say that the longer the trade war goes without a resolution, the harder it becomes to actually broker a deal.

The Chinese delegation arrived in Washington to begin high-level negotiations with the Trump administration on Thursday.

Friday’s agreement marked a turnaround in the negotiations after months of discord. In May, talks on a larger deal backslid, leading to increases in tariffs and retaliatory tariffs.

A June meeting between Trump and Chinese President Xi Jinping aimed to restart the talks, which again fell apart amid growing distrust, leading to another round of tariff increases.

Over the past several weeks, however, both sides took several conciliatory measures, as China bought up U.S. soybeans and the U.S. delayed further tariff increases on Chinese imports.

While the deal represents a small win for Trump, the question of whether a broader deal that would end the trade war, eliminate the tariffs and redefine the U.S.-China trade relationship remains open.

Business groups have blamed the trade war for growing uncertainty and propelling a decline in economic output, and have pushed for a deal that would eliminate the tariffs altogether.

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