SEMA eNews Vol. 22, No. 51, December 19, 2019

U.S. Reaches Partial Trade Deal With China, But Most Tariffs Remain Unchanged

By SEMA Washington, D.C., Staff

The United States and China have agreed to a “phase one” trade deal whereby China will buy more U.S. goods and implement some structural changes to its trade laws. In exchange, the United States will not impose tariffs that were scheduled to go into effect on December 15 on the “List 4” consumer goods, such as cell phones and computer laptops. The United States will reduce from 15% to 7.5% tariffs already in effect on other List 4 products. However, the 25% tariffs on List 1, 2 and 3 products remain unchanged. Lists 1 and 2 include miscellaneous metal and rubber parts, wiring and measurement devices. List 3 covers most auto parts imported from China.  

The agreement is being finalized and will likely be signed in January. It is to include intellectual property enforcement measures for patents, trademarks, trade secrets and counterfeit goods. The agreement will address several unfair Chinese technology transfer practices identified by the U.S. Trade Representative, including an end to the practice of pressuring foreign companies to transfer their technology to Chinese companies as a condition for obtaining market access, administrative licenses or receiving advantages from the government. The agreement will help prevent currency manipulation with a ban on competitive devaluation and targeting of exchange rates. The agreement will include a dispute resolution mechanism via bilateral consultations with the ability to impose tariffs if disputes cannot be resolved.

U.S.-Chinese negotiators will now pursue a “phase two” deal to address outstanding issues, such as reducing the U.S.-China trade imbalance, addressing cybertheft and stopping Chinese subsidization of key industries. A reduction or removal of the 25% tariffs on List 1, 2 and 3 products is unlikely in the short-term if they are viewed as bargaining chips in the phase two negotiations. A phase-out of the 25% tariffs may also be tied to a demonstration that the phase one enforcement measures against unfair trade are effective.

For more information, contact Stuart Gosswein at stuartg@sema.org.

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