The ties between Washington & Beijing are constantly getting strained, Do American firms in China looking to exit?

Ties between Washington & Beijing getting strained, American firms in China looking to exit?

Global markets heaved a sigh of relief when the world's two largest economies signed the first phase of the trade truce, ending an 18-month standoff that feared a further slowdown in the global economy. The deal didn't end the hundreds of billions of dollars of tariffs imposed by both the countries but some reliefs were provided to the Chinese.

The trade war first started when US President Donald Trump accused China of unfair trade practices and intellectual property theft. So, let's look at the key issues and see whether the phase 1 of this deal address them or not.

Tariffs

The good news for China is that the US agreed to reduce half of the total tariffs imposed on its goods in September 2019. However, both countries have not rolled back enormous tariffs imposed on each other's exports. This means Washington's tariffs on $360 billion Chinese goods and Beijing's $110 billion on US goods will continue. The US also agreed that it will not impose tariffs that were supposed to be put in place on December 15.

Intellectual property

China has long been accused of intellectual property theft even by the previous US administrations and was one of the main reasons for the confrontation. This truce deals with intellectual property issue as China has committed to protect trademark, patents and copyrights. China also vowed of stronger criminal and civil laws to punish intellectual property thefts and counterfeiting.

The deal also ensures that US-based pharmaceutical industries get more shields from China as far as patents are concerned.

American businesses have often complained of surrendering technology and trade secrets to China as a necessity to do business in the country. China pledged to eliminate any forced transfer of technology which includes removing pressures of licensing and administrative approvals.

Purchase of American goods

Through this deal, the US President wanted to push US exports to China which is significantly lower than Chinese exports to the US. China vowed that it will purchase $200 billion worth of goods from the US in the next two years. The list of purchase includes $32 billion of agricultural products, $52.4 billion of energy exports, $77.7 billion worth manufactured products and $37.9 billion of services.

China, however, claims that the buying will depend on the market demand and some analysts and experts are also sceptical whether American manufacturers and farmers can produce enough to meet Chinese demands.

China has also relaxed a number of health standards which earlier were used to prevent American imports. These changes will benefit US products, such as dairy, meat, seafood, poultry, among others.

Subsidies and cybersecurity

Trump has complained of China offering massive industrial subsidies to its domestic firms, making it difficult for American businesses to compete. These subsidies were especially granted to solar panel and steel industries. It was a major issue of conflict but the truce has no word on these subsidies.

The trade deal also doesn't comment on other concerning issues such as cybersecurity and Chinese control of cloud computing and data storage.

Currency manipulations

Ahead of signing of the first-phase deal, the US removed its currency manipulator tag from China. In the deal, China pledged that it will not manipulate its currency for gaining unfair trade advantage, a commitment the country made for years to G20 nations and are its obligations to the International Monetary Fund (IMF).

The US treasury earlier said that China has made “enforceable commitments to refrain from competitive devaluation” and said that it would publish relevant data on exchange rates and external balances.

Access to financial services

With the deal, the US says that its financial services companies have got a better access to Chinese markets. The deal binds China to address concerns of foreign equity limitations and discriminatory regulatory requirements.

Interestingly, China already started giving foreign financial companies more room from 2017. Also, US payment companies' entry in the Chinese market will not be easy as the market is majorly dominated by domestic firms.

Dispute resolving mechanism

The deal also says that future trade disputes be settled through bilateral consultations, which will initiate from working level and escalate to top-tier.

If bilateral engagement doesn't solve the differences, then the affected party can impose penalties or tariffs and the other country cannot in retaliation put more tariffs. In such an act of retaliation, any party can give written notice and the deal could be withdrawn.

Global markets heaved a sigh of relief when the world's two largest economies signed the first phase of the trade truce, ending an 18-month standoff that feared a further slowdown in the global economy.

Global markets heaved a sigh of relief when the world's two largest economies signed the first phase of the trade truce, ending an 18-month standoff that feared a further slowdown in the global economy. The deal didn't end the hundreds of billions of dollars of tariffs imposed by both the countries but some reliefs were provided to the Chinese. The trade war first started when US President Donald Trump accused China of unfair trade practices and intellectual property theft. So, let's look at the key issues and see whether the phase 1 of this deal address them or not. Tariffs The good news for China is that the US agreed to reduce half of the total tariffs imposed on its goods in September 2019. However, both countries have not rolled back enormous tariffs imposed on each other's exports. This means Washington's tariffs on $360 billion Chinese goods and Beijing's $110 billion on US goods will continue. The US also agreed that it will not impose tariffs that were supposed to be put in place on December 15. Intellectual property China has long been accused of intellectual property theft even by the previous US administrations and was one of the main reasons for the confrontation. This truce deals with intellectual property issue as China has committed to protect trademark, patents and copyrights. China also vowed of stronger criminal and civil laws to punish intellectual property thefts and counterfeiting. The deal also ensures that US-based pharmaceutical industries get more shields from China as far as patents are concerned. American businesses have often complained of surrendering technology and trade secrets to China as a necessity to do business in the country. China pledged to eliminate any forced transfer of technology which includes removing pressures of licensing and administrative approvals. Purchase of American goods Through this deal, the US President wanted to push US exports to China which is significantly lower than Chinese exports to the US. China vowed that it will purchase $200 billion worth of goods from the US in the next two years. The list of purchase includes $32 billion of agricultural products, $52.4 billion of energy exports, $77.7 billion worth manufactured products and $37.9 billion of services. China, however, claims that the buying will depend on the market demand and some analysts and experts are also sceptical whether American manufacturers and farmers can produce enough to meet Chinese demands. China has also relaxed a number of health standards which earlier were used to prevent American imports. These changes will benefit US products, such as dairy, meat, seafood, poultry, among others. Subsidies and cybersecurity Trump has complained of China offering massive industrial subsidies to its domestic firms, making it difficult for American businesses to compete. These subsidies were especially granted to solar panel and steel industries. It was a major issue of conflict but the truce has no word on these subsidies. The trade deal also doesn't comment on other concerning issues such as cybersecurity and Chinese control of cloud computing and data storage. Currency manipulations Ahead of signing of the first-phase deal, the US removed its currency manipulator tag from China. In the deal, China pledged that it will not manipulate its currency for gaining unfair trade advantage, a commitment the country made for years to G20 nations and are its obligations to the International Monetary Fund (IMF). The US treasury earlier said that China has made “enforceable commitments to refrain from competitive devaluation” and said that it would publish relevant data on exchange rates and external balances. Access to financial services With the deal, the US says that its financial services companies have got a better access to Chinese markets. The deal binds China to address concerns of foreign equity limitations and discriminatory regulatory requirements. Interestingly, China already started giving foreign financial companies more room from 2017. Also, US payment companies' entry in the Chinese market will not be easy as the market is majorly dominated by domestic firms. Dispute resolving mechanism The deal also says that future trade disputes be settled through bilateral consultations, which will initiate from working level and escalate to top-tier. If bilateral engagement doesn't solve the differences, then the affected party can impose penalties or tariffs and the other country cannot in retaliation put more tariffs. In such an act of retaliation, any party can give written notice and the deal could be withdrawn.

US China trade deal: What were the key issues and are they resolved?

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Ties between Washington & Beijing getting strained, American firms in China looking to exit?

US China trade deal: What were the key issues and are they resolved?