A TRUCE in the trade war between the United States (US) and China was announced last Saturday by US officials, nearly two years after it was launched by US President Donald Trump in a bid to win concessions to improve its trade balance with China.
The US agreed to cancel planned tariffs on Chinese goods and roll back others which it had imposed in the last 22 months. The US in particular cancelled a 15 percent tariff on Chinese electronic products that had been scheduled for last Sunday. China suspended its own tariffs on US products which had been due to begin Sunday.
China committed to buy $200 billion in US goods and services in the next two years. This would be $10 billion more than the $190 billion that China imported in 2017, so that would help improve the US trade balance.
A tweet from President Trump stated that China “agreed to many structural changes and massive purchases of agricultural products, energy, and manufacured goods, plus much more.” Details of the agreement will be known when the two sides sign a phase-one agreement in the first week of January.
The initial reaction to the news has not been generally positive in American trade circles. One trade economist said the gains in the deal do not compensate for the damage to US famers and businesses caused by months of the trade war.
American farmers suffered greatly from the tariffs that cut down imports on both sides. Prior to the hostilities, China was the second largest importer of US agricultural goods; it has now dropped to fifth. “The gains in the deal do not compensate for the damage to US farmers and businesses,” said one trade economist.
The trade war had not only slashed US agricultural exports; it had also caused a surge in US farm bankruptcies and the US government had to pay tens of billions of dollars as aid to farmers. With President Trump preparing for a reelection bid in November, 2020, he would need to keep the continued support of US farmers and ranchers, one of the strongest sectors of his political base.
The US-China global war had minimal impact on the Philippine economy, according to Secretary of Trade and Industry Ramon Lopez, but it has slowed down many global economies and this could eventually affect the smaller economies like the Philippines, he said.
We thus welcome the truce in the trade war announced last weekend. It is not quite over as there are still major disagreements, but the first steps away from confrontation have been taken. We look forward to more such steps in the coming months, leading to boosts in the economies of the two nations, with positive effects on the rest of the world economy.
