U.S. and China reach a trade deal

U.S. and China reach a trade deal

By Maria Ellis, Director, Federal Affairs & Executive Director, PNITA

American’s can breathe a small sigh of relief now that they will be spared the 15% tariffs on an additional $160 billion worth of Chinese goods. This moves follows anxiety felt over another round of U.S. tariffs on China, which was set to go into effect on Sunday Dec. 15. Instead, the Administration announced an 11th hour “Phase One” deal with China, which would include canceling implementation of the said tariffs.

The text of the deal has yet to be released but we know it would cut, but not eliminate, existing tariffs that are already in place. In total, there have been four tranches – or sets – of tariffs implemented against China by the U.S. The fourth tranche has two parts, A and B, the last of which were the canceled tariffs for Dec. 15. At each step, China has implemented retaliatory tariffs on U.S. goods. Under this agreement, the first three tranches of tariffs will stay intact, but tranche 4A would be reduced from 15% to 7.5%.

This is great news for consumers, as tranche 4B would have hit the average consumer particularly hard. Though most holiday shopping would not have been hit by the 4B, it would have impacted shoppers in the New Year. As it stands, the existing 4A tariffs are already hitting items like shoes, televisions and clothing.

According to USTR Lighthizer, China has agreed to resume purchases of U.S. agricultural products, up to $40 billion per year for the next two years, though some administration officials are claiming up to $200 billion total. It’s worth noting that even before the trade battle, U.S. agricultural exports to China never surged beyond $26 billion per year. Though both economies have been feeling the impact of the tariff war, farmers and ranchers in the U.S., some the president’s strongest base have been particularly hurt by the tariffs. Farm bankruptcies have increased nationally about 25% since the tariff war began, but in the Pacific Northwest, that figure is closer to 70%.

In our region, Chinese tariffs are higher than 50% on many of our products, including hazelnuts, fresh apples and cherries. While wheat exports to China had been our 5th largest in the last three years, there have been no wheat shipments to China in months. Oregon exports of hay are also down 50% to that market. Knowing how important this segment of America is to the president in an election cycle, few are surprised but still relieved by today’s announcement

So what’s next? Though the Phase One deal has been announced, the two parties still have to sit down to work through the details and sign an agreement, something they hope to accomplish by the end of January. This plan is only the first step in developing a more robust agreement between the world’s two largest economies, but hopefully it signals a commitment by both parties to permanently deescalate this 17-month-long trade battle that has rattled global markets.

Stay up-to-date on issues impacting Oregon trade with our new social media accounts on Twitter at @TradeinOR and on LinkedIn. If you want to get involved or become a member of PNITA, you can reach out to Executive Director, Maria Ellis, at pnita@portlandalliance.com.