What’s the Deal With Phase One of the U.S.-China Trade Deal?

By Matthew McMullan
Nov 05 2019 |
Getty Images

Phase One: Not yet complete, because China may want more tariffs lifted.

So! After all of the fussin' and feudin', it looks like the United States and China are gonna sign a trade agreement. What's the deal with it?

Yes, what’s in this deal?

It would be a “phase one” agreement, as President Trump called it when it was first announced a few weeks ago, meaning it’s meant to be a precursor to a more substantive deal down the road. It would have China buy a big ol’ load of agricultural products (which would not coincidentally help Trump with voters in farm states), strengthen intellectual property protections for foreign firms operating in China, and oh so slightly open up the Chinese financial services market. The United States would refrain from enacting tariffs on Chinese goods scheduled to kick in in December, and roll back others.

Apparently they’ve ironed out enough of the details since “phase one” was first announced that they’re now talking about finding a place to hold a summit for a signing ceremony between Trump and Chinese President Xi Jinping (the original spot – a scheduled economic conference in Chile – had to be, um, scrapped.  

How’s everybody liking it?

Some Wall Street types like it enough, because signing a deal would invite certainty into the trade relationship with China, and certainty helps them make money. Others think China is just gonna press for more American concessions before phase one gets completed.

The business associations representing American firms in China don’t really like it, because phase one does little to address the structural problems they identify in the way the Chinese government manages the economy. And they argue the new law governing financial services is full of loopholes.

Does the Alliance for American Manufacturing like it?

Eh …

No deal has yet been signed. The Chinese negotiators, meanwhile, are pressing the Trump administration to roll back even more tariffs. Let’s see what happens next week!