The Future of “Phase One” Deal

U.S and China reached an agreement regarding the “Phase One” deal in more than a month ago. However, until this day, it is unknown when U.S. President Donald Trump and China’s President Xi Jinping will sign this deal. The trade war between the two largest economies started in 2018. However, due to numerous disagreements, the future of the “phase one” deal remains in limbo.

President Trump and Treasury Secretary Steven Mnuchin stated that it could take up to five weeks to sign this deal. Nevertheless, five weeks already passed and still deal is not signed. Moreover, the negotiations process took more time than expected, and it is getting more complicated, according to experts.

On November 20, during his visit to Texas, Trump briefly talked about this problem. He mentioned that China is not doing enough to live up to his expectations. Moreover, China’s Vice Premier, who is also China’s lead negotiator also commented. Liu He stated he was optimistic about a phase one deal. However, his words showed that China is cautious when it comes to the future of this agreement.

Nevertheless, Trump and U.S. Trade Representative Robert Lighthizer believes that by canceling the tariffs, the U.S. would undermine its position. Moreover, several major issues such as intellectual property rights and forced technology transfers remain a bone of contention. Trump and Lighthizer thinks that rolling back tariffs for a deal would undermine these problems.

Chinese officials suggested that Xi Jinping and Trump might sign a “phase one” deal in early December.

Phase One deal and Geopolitics

China’s position remains that the U.S. should additional tariffs as part of a final trade agreement. Also, Beijing demanded to scrap tariffs in phases is a prerequisite for a “Phase one” deal.

One of the best solutions to measure the success of trade talks is to wait until December 15. This is a date when tariffs on about $156 billion in Chinese products will be applied.

According to several analysts, if trade talks are going well, U.S. won’t impose these tariffs starting from December 15. Otherwise, this may signal that the U.S. and China won’t sign the “phase one” deal until 2020.

There is another issue that can derail the ongoing negotiations process. This problem is the political crisis in Hong Kong.

Demonstrations in Hong Kong started in June. The situation remains tense as violent protests caused serious problems concerning the security in the city.

Additionally, on Tuesday, the U.S. Senate passed a bill that angered the Chinese authorities. U.S. senate criticized the crackdown on demonstrators and promised to support Hong Kong.

Hopefully, there is some good news, as well. For example, the U.S. government began issuing licenses, which will enable the U.S. companies to cooperate with Chinese tech giant Huawei.

This is a huge step forward, as American companies used to make billions of dollars by selling their products to Huawei Technologies Co Ltd. It is important to mention Huawei is the largest telecoms equipment maker in the world. Also, it is one of the largest smartphone makers.

Right now, it is quite hard to say when the U.S. and China will sign this agreement. The global economy is slowing down. In this situation, any further delays would negatively affect the U.S. as well as China’s economy.