Phase 1 of a trade deal between the US and China was reported on Friday, December 12th. The Trump administration claimed this is a “big win” for the US, but is it really? So far, the foundational issues that started the 2-year trade war have not been addressed. The proposed deal offers minimal relief for US product companies, which have already paid $88 billion in tariff fees since the conflict started (NPR).

 

The Trade War erupted out of rare US bipartisan consensus that China manages their economy unfairly. China’s economic structure, which supports state-run enterprises, puts foreign companies at a disadvantage when competing with Chinese companies. The Trade War has largely been an effort to force China to conform to the standards and practice of a market economy as defined by the West (FORBES). However, the phase one deal does not address this core issue at all.

 

Essentially, the “phase one deal” is an unsigned deal where China agreed to buy more US agriculture products. In return, the US halted additional scheduled tariffs that were set to take effect on Sunday. The US also agreed to reduce the tariffs on billions of Chinese imports. China proposed a similar agreement back in 2018, but the US refused.

 

It’s not difficult to see that this “deal” is not much of a deal at all. Rather, this agreement was a political stunt engineered to divert attention away from the articles of impeachment that were filed against President Trump last week. This deal with China also coincided with the new version of the North American Free Trade Agreement (NAFTA) which was signed last week. Trump touted himself as a “great dealmaker” in a series of tweets, which undoubtedly pleased his voter base, including American farmers who have been hard hit.

 

While it is possible that a future Phase Two deal could include certain rules for protecting US Intellectual Property in China, for now no agreement on those terms has been made. The Chinese know that the Trump administration is in a hurry to sign a trade deal before the 2020 election, which gives them an upper hand as these negotiations continue.

 

The trade war is certainly not over. At best, it’s on pause.

 

As the future is still uncertain, Blacksmith remains committed to helping you find the best solutions for your supply chain during this difficult time. To find a solution for your product business, contact us here.