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United States And China Sign 'Phase 1' Of Trade Deal


While Pelosi called votes on Capitol Hill today, there was a split-screen celebration taking place at the other end of Pennsylvania Avenue. President Trump hosted diplomats and CEOs in the White House East Room. The crowd included everyone from Henry Kissinger to casino magnate Sheldon Adelson. They were there to watch Trump sign a preliminary trade deal with China.


PRESIDENT DONALD TRUMP: With this signing, we mark more than just an agreement. We mark a sea change in international trade. At long last, Americans have a government that puts them first.

SHAPIRO: The agreement amounts to a partial cease-fire in the administration's trade war with Beijing. It relaxes some, but not all, of Trump's tariffs on Chinese imports. In exchange, China has agreed to buy a lot more American products while making some changes in its own economy.

NPR's Scott Horsley is here to talk about this.

Hi, Scott.


SHAPIRO: The president says China has agreed to buy $200 billion more from the U.S. over the next two years. That is over and above what China bought in 2017 before the trade war started. How realistic is that number?

HORSLEY: It's a tall order. Let's take just agriculture, for example, which is a sector that's been hammered during the trade war. The best year American farmers ever had when it comes to selling to China was back in 2012 when they sold $26 billion worth of produce. Trump wants to boost that to about $32 billion this year and to almost $40 billion next year. So we're talking about a 50%-plus increase from the all-time high. And the president's looking to similarly increase sales of manufactured goods, energy products and American services.


TRUMP: We're delighted that the Chinese consumers will now enjoy the greater access to the best products on Earth, those made, grown and raised right here in the U.S.A.

HORSLEY: Trump joked again today that farmers are going to have to buy more land and bigger tractors. But one farmer I spoke with is not really ready to take that plunge just yet. And China's vice premier also stressed during the signing ceremony that China's purchases will be based on what he called market demand.

SHAPIRO: China is also promising to provide greater protection for American companies' intellectual property and make some other changes. But it has made promises like that in the past and not always delivered. Why does the administration think this time will be different?

HORSLEY: Yeah, this has been one of the biggest complaints from the United States, and this is really the reason Trump launched the trade war 18 months ago. U.S. companies were tired of having their intellectual property stolen in China. They were tired of being forced to share technological know-how as a cost of doing business there.

This agreement does include provisions designed to stop those practices. And U.S. Trade Representative Robert Lighthizer insists there are effective enforcement mechanisms. Lighthizer also says there are reformers in China who actually want to see stronger intellectual property protections for their own companies. He told reporters this agreement will work if China wants it to work. And, he added, they expect and we expect this deal to be enforced to the letter.

SHAPIRO: So those are the concessions that China is making. And in exchange, the administration has agreed to relax some of the tariffs that it imposed over the last few years. But a lot of those tariffs are not going away, right?

HORSLEY: That's right. The administration did suspend the Christmas round of tariffs that was set to hit a lot of popular toys and electronics last month. It also lowered the tariff rate on a lot of other consumer items. But nearly two-thirds of the stuff we buy from China is still subject to steep import taxes, and President Trump says he has no intention of lifting those tariffs anytime soon.


TRUMP: I'm leaving them on because otherwise, we have no cards to negotiate with.

HORSLEY: Trump sees these tariffs as both a way to ensure China delivers on its commitments in this phase one trade deal and also as leverage when he and his team try to negotiate phase two, where they hope to tackle some of the outstanding issues, like the subsidies that the U.S. thinks give Chinese - China's state-owned companies an unfair advantage in global markets.

What the president didn't acknowledge, though, is that this bargaining chip he's talking about is being paid for by Americans. We've had numerous studies now that have shown it's American importers who are the ones paying these tariffs, notwithstanding the president's claims to the contrary. And it looks like they're going to have to keep paying the tariffs for the foreseeable future.

One industry that's been hard-hit by that is the manufacturing sector. A lot of the tariffs apply to components and supplies that U.S. factories buy from China. That's one reason factories have been in a slump since last summer and we saw 12,000 manufacturing jobs lost just last month.

SHAPIRO: That is NPR's Scott Horsley on phase one of this trade agreement with China. We'll have you back for phase two.

Thanks, Scott.

HORSLEY: You're welcome. Transcript provided by NPR, Copyright NPR.

Scott Horsley is NPR's Chief Economics Correspondent. He reports on ups and downs in the national economy as well as fault lines between booming and busting communities.
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