The United States and China have decided to put their trade war on hold and suspend additional tariffs from being levied as they attempt to reconcile their differences and reach an agreement within 90 days.
Washington revealed that while in Argentina, U.S President Donald Trump told Chinese President Xi Jinping that he would not push through the imposition of an additional 25% tariffs on $200 billion of Chinese goods on Jan. 1 as previously announced.
On the other hand, Beijing committed to purchase a “substantial amount” of products and services from the agricultural, energy and industrial sectors of the United States.
Both parties have agreed to start a series of new trade talks to address issues including technology transfer, intellectual property, non-tariff barriers, cyber theft and agriculture.
In the event that no deal will be reached within the grace period of 90 days, both have agreed to raise tariffs from 10% to 25%.
Trump told reporters that this was a step in the right direction for both countries:
“It’s an incredible deal. What I’d be doing is holding back on tariffs. China will be opening up. China will be getting rid of tariffs.”
The President said that under the deal, China would buy a “tremendous amount of agricultural and other products” from the United States. “It’ll have an incredibly positive impact on farming.”
Chinese government’s top diplomat and State Councilor Wang Yi, told reporters in Buenos Aires that the two sides are optimistic on the agreement and consider the move to have “effectively prevented the expansion of economic frictions between the two countries”.
“Facts show that joint interests between China and the United States are greater than the disputes, and the need for cooperation is greater than frictions,” he said.
Paul Haenle, Director at the Carnegie–Tsinghua Center in Beijing said, “I think this is not a breakthrough – it’s more of avoiding a breakdown. This is not a worst case outcome but the hard work is ahead of them,”
“The Chinese have to come into (the talks) with a sense of urgency,” he added.
Another issue that still has to be resolved is the United States’ disapproval of increased Chinese presence in the South China Seas. Beijing’s militarization threatens key trading areas in the seas which translate to US$3 Trillion in revenues every year.