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Tarrific or Tarrifying? An Update on the US-China Trade War

Is phase one of a trade deal ready to go? We thought it was, until it wasn’t.

Eighteen months. That is how long the U.S.-China trade dispute has lasted, and there might finally be light at the end of the tunnel. That is, if the roof does not collapse midway and block the only exit. Right now, it looks like Beijing and Washington are inching ever so closer to an agreement. Of course, the global affair would not be complete if there were not any bumps in the road.

The Tarrific News

Since the White House announced that China and the U.S. were ready to put together phase one of a comprehensive trade agreement, the world’s two largest economies have kept in touch. Even if there are disagreements regarding minute details, Beijing and Washington are maintaining an open dialogue, which was not the case this past summer when representatives stopped talking.

Recently, Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer, and Chinese Vice Premier Liu He held “constructive discussions” over the telephone. The purpose of the call was to address each other’s concerns and ensure that they remain in close contact should any disputes arise. Speaking at a Council on Foreign Relations (CFR) event, chief White House economic adviser Larry Kudlow confirmed that “we’re getting close” to a deal. He added that “the mood music is pretty good, and that has not always been so in these things.”

Beijing is showing signs of good faith. The U.S. Department of Agriculture (USDA) reported a transaction of 264,000 tons of soybeans between the U.S. and China for the 2019-2020 marketing year. It did fall short of initial projections of 475,000 tons. Still, it was the first confirmation of a soybean sale since the two nations announced the first phase of an arrangement.

The U.S. is also keeping up its end of the bargain over Huawei. The Commerce Department announced a three-month extension of a reprieve to allow American companies to do business with the Chinese telecommunications juggernaut, which had previously been banned by the Trump administration. Since a lot of internet and cell phone carriers in rural regions of the U.S. purchase networking equipment from Huawei, these businesses can continue to update their networks and ensure the best access in the remotest areas of the nation.

The Tarrifying News

So, the U.S. and China should just be getting the pens ready to sign phase one, right? Right?

Well, President Donald Trump decided to tell the press during a Cabinet meeting: “If we don’t make a deal with China, I’ll just raise the tariffs even higher.” This would have been market-shattering a few months ago, but it seemed that investors were numb to the president’s remarks. The Dow Jones Industrial Average shed more than 100 points at the end of the trading session, but traders were more focused on Kohl’s and Home Depot reporting disappointing quarterly numbers than the president’s threats.

Earlier this month, the Chinese Ministry of Commerce told reporters the countries had agreed to roll back some of the current tariffs. However, President Trump revealed that he had not agreed to scrap any of the tariffs, dampening investors’ hopes for a trade deal. Over the last 18 months, the U.S. has slapped China with tariffs on $500 billion in goods, while China has retaliated with $110 billion in levies.

While unrelated to the trade spat, the Senate unanimously approved bipartisan legislation – S.1838 – that supports the pro-democracy protesters in Hong Kong. As part of the bill, Washington will conduct an annual review to determine whether the region’s special trading status is justified, which includes analyzing if it is autonomous from Beijing.

Sen. Marco Rubio (R-FL), who is a lead sponsor of the initiative, said in a statement on the Senate floor:

“The United States has treated commerce and trade with Hong Kong differently than it has commercial and trade activity with the mainland of China. But what’s happened over the last few years is the steady effort on the part of Chinese authorities to erode that autonomy and those freedoms.”

It is unclear whether the bill will affect trade talks.

Here’s A Pen

Right now, the scales are tilting in favor of a trade agreement. There is always a chance that the administration will back out or that China could present a last-minute demand that will perturb President Trump. Millions of investors, businesses, and commentators are begging and pleading with Beijing and Washington to grab a pen made with labor from China and sign on paper that was manufactured with American lumber. The world needs a breather from all the anxiety.

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Read more from Andrew Moran.

Read More From Andrew Moran

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