The 86-page agreement came two years after fraught negotiations and a trade war between the world’s largest two economies that hit US soybean producers.
What We Know:
- In August 2019, American taxpayers spent about $28 billion to help bail out farmers. These payments included trade groups and purchases from food banks.
- Heading into the 2020 election, the pause in the war has given Trump an advantage to offer something concrete to farmers. Just as lawmakers on Pennsylvania Avenue are prepping to vote for impeachment, Trump advised from the East Room of the White House, “together we are righting the wrongs of the past and delivering a future of economic justice and security.” He also added that many people thought this would not happen.
- Trump said he would visit China in the future. President Xi Jinping wrote a letter of agreement to Trump as a sign that their two countries would resolve their differences. Jinping wrote that this was “good for China, the US, and the whole world”. He also said he would remain close with Trump and hoped that the US would treat Chinese companies fairly. China’s vice premier and top negotiator Liu He read the letter out loud during a signing event.
- Under the agreement, China has promised to buy an additional $12.5 billion in US agriculture in the first year and $19.5 billion in the second year. These agreements came after China made $24 billion in farm purchases in 2017. In exchange for the agreement, the US agreed to reduce tariffs on $120 billion in Chinese products from 15% to 7.5%. These changes will take effect 30 days after the pact’s signing.
- Farm Bureau President Zippy Duvall said this agreement was an “important step…China was once the largest market for U.S. agricultural products but has dropped to fifth largest since retaliatory tariffs were introduced. This agreement will help turn around two years of declining agricultural exports.”
- Ambassador Robert Lighthizer, the President’s top trade negotiator, said that would provide access to American companies. Lighthizer said to reporters at the White House “are we in an ideal spot? No…Is this a massively good first step? Yes.”
- The pledge by China to buy more US farm products is part of $200 billion package which included manufactured goods and energy exports by 2021. The two sides estimated that the purchases will continue beyond their two-year deal. The products include soybeans, wheat, cotton, and pork. The senior administration official told reporters that the US would be monitoring sources from both countries to make sure that China is fulfilling its promise.
- The deal provided protection for American companies. Pledges in the deal go farther then what China had agreed in the past, but it didn’t require the government to change any laws and regulations. Trump said while thanking Cabinet members, “Nobody really understood the deal until today when we released it, so it’s a much bigger deal than people thought.” He also added that the next round of negotiations will start soon.
The tariff will stay on as a leverage against China and will come off when the administration completes the next phase of the deal.