Amid a slowing economy, an unpopular foreign policy move, and an abuse of power scandal that has brought the specter of impeachment, President Trump needed a victory. Now, it appears that the president is claiming at least a partial victory in the trade war with China.
Markets are certain to cheer Mr. Trump’s announcement that the US and China have reached a “substantial phase one deal.” Treasury Secretary Mnuchin also said that the US would delay implementation of the next round of tariffs, scheduled to go into effect next week.
The details of the deal are not yet known. Trump said that phase one will be written over the next three weeks and will address intellectual property and financial services concerns as well as the purchase of $40-50 billion in US agricultural products by China.
China’s Vice Premier Liu He appeared with President Trump in the Oval Office for the announcement of the deal. The fact that the Chinese representative was present when Trump announced the deal may mean that a true breakthrough has been achieved. Previous deals trumpeted by the president have proven ephemeral.
When asked what changed since talks broke down in May, Trump said the new deal was “bigger,” per CNBC. The vice premier described the difference as “cooperation,” which may mean that the Trump Administration eased its demands.
A final deal may still be weeks away. Mnuchin said, “We have a fundamental understanding of the key issues, but there is more work to do.”
Like President Obama’s nuclear deal with Iran, President Trump’s China trade deal will reportedly not require congressional approval. Trump tweeted this morning that he would sign the deal “fast and clean.”
David Dollar, a senior fellow at the Brookings Institution, told CNBC that “the two sides are not discussing a trade treaty that requires congressional approval.”
“It is a more informal agreement in which China will undertake to do certain things such as buy U.S. agricultural products and the administration will undertake not to follow through with the next rounds of tariffs. Since those tariffs do not require congressional approval, the administration can postpone or cancel without that approval,” Dollar said.
“Phase two [negotiations] will start almost immediately” after the first phase is signed, Trump said.
Regardless of the details of the deal, any delay in the upcoming implementation of tariffs will be a good thing for the economy.