In another encouraging sign, China and the U.S. have reached an historic agreement to reduce high tariff rates. Yet this decision has the potential to do more than just defuse immediate trade tensions between the two countries. China will reduce its average tariff rate on U.S. goods from a dauntingly high 125% to a far less intimidating 10%. In exchange, U.S. will lower its tax on Chinese imports from 145% to 30%. Significantly, this agreement is only temporary, lasting just 90 days. Throughout the rest of this period, negotiators on both sides have committed to increasing the scope of the deal.
The climate deal follows months of simmering tensions over unfair trade practices and competition over technology. China has expressed its commitment to uphold the terms of the agreement, stating that it will “continue to take resolute and forceful measures to safeguard its legitimate rights and interests.” At the same time, China’s Ministry of Commerce was condemning U.S. actions, saying they “seriously undermine the consensus” achieved during earlier talks.
Despite these concessions, tensions remain high. In addition, the U.S. has claimed in several ways that China has reneged on commitments made earlier. President Donald Trump has been very outspoken with his opinion on the matter, claiming that China has “totally broken the deal with us. He went on to say, “So much for being Mr. NICE GUY! His statements underline the doubts that now exist as to China’s commitment to the letter and spirit of any eventual trade agreement.
China’s recent actions, including its decision to stop purchasing U.S. farm products, have raised concerns in Washington about Beijing’s intentions. Analysts are convinced that China is implementing a wider national strategy to secure the status of a dominant regional power in the Asia-Pacific. This expansion is most visible in its efforts to assert dominance over Taiwan, a crucial U.S. partner and a global leader in technology.
The critical, continuous race between the two countries has been to develop the superior technological capability. They’re doubling down on prioritizing key sectors, including artificial intelligence. In October of last year, the U.S. government took ambitious steps to curb China’s access to advanced computer chips. This step is very important to protect America’s technological leadership.
As negotiations continue, the situation remains fluid. The 90-day period for moving from a basic framework to a detailed agreement gives both sides a chance to cool their jets and work through objections and issues. Yet doubt remains as to whether this window of relative calm will help bring about more stable solutions.
