• Stephen M. De Luca

The United States and China Reach Agreement on Phase 1 of a Trade Deal

For several years, there has been a lot of uncertainty regarding bilateral trade between the United States and China given the trade dispute between the two countries. Both sides have threatened to impose tariffs, market access barriers, and retaliatory measures upon each other, making it increasingly difficult for importers, exporters, and others to predict what would happen and to make informed business decisions.

Fortunately, some of that uncertainty has been ameliorated with a newly-signed trade deal. On January 15, 2020, the United States and China entered into what is called Phase 1 of an agreement that requires structural reforms and other changes in China’s economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange. It also includes a commitment by China to make substantial purchases of U.S. goods and services in the coming years, as well as dispute resolution provisions to address complaints that one side or the other has failed to comply with any of its commitments under the agreement.

The White House said that it will not proceed with 15% tariffs that were scheduled to go into effect on nearly $160 billion worth of Chinese goods, including cell phones, laptop computers, toys and clothing, but noted that tariffs of 25% on $250 billion worth of Chinese goods would remain in effect until both sides could reach an agreement on a Phase 2 of the trade deal. Chinese Deputy Finance Minister Liao Min said that as a result of the agreement, Beijing would drop retaliatory tariffs that were intended to go into effect as a response to US measures that were scrapped as a result of the agreement, including a 25% tariff on U.S.-made autos.

There is still much that remains uncertain, however, including whether Phase 1 will be fully implemented and observed by both sides, and whether the two sides can negotiate a Phase 2 to the agreement during a presidential election year. It may also be unclear as to whether the products and services you trade in are covered by the provisions of Phase 1 or will remain subject to increased tariffs. U.S.-China trade remains fluid and dynamic, with updates and changes occurring on a daily basis. In addition, China remains the subject of the most trade-remedy actions in the United States, including anti-dumping and countervailing-duty investigations and determinations by the Commerce Department and International Trade Commission.

For sound advice on issues you are facing in your trade matters between the U.S. and China, please contact our international trade practice group. Our attorneys have decades’ worth of experience to advise you and represent you before government agencies and in the courts. We are ready to meet with you and address any questions or concerns you might have.

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