At a White House ceremony on Wednesday, January 15, 2020, U.S. President Donald Trump and Chinese Vice Premier Liu He met to sign Phase 1 of the Trade Deal that has been negotiated since May 2019 in order to end any further escalation in the trade war between the two countries. The agreement consists of eight chapters covering intellectual property, technology transfers, financial services, exchange rate practices, and trade in agriculture, energy, and manufactured goods, as well as trade in services.
As part of the agreement, China pledges to increase its U.S. imports by $200 billion over the next two years. China’s pledge covers imports of U.S.-origin manufactured goods, energy, agriculture, and services. China also commits to liberalizing its financial sector, strengthening intellectual property protection, and opening its markets without technology transfer requirements that are not based on market principles. Unlike the May 2019 agreement that Chinese negotiators walked out on upon reviewing the final text, this agreement notably does not require any changes to Chinese law in order to accomplish these commitments. We encourage clients to review the text of the agreement to fully understand the scope of the commitments.
In return, the U.S. has foregone its planned Section 301 List 4B tariffs and will halve the current 15% Section 301 List 4A tariffs to 7.5%. The reduction of List 4A tariffs will take effect 30 days from today, on February 14, 2020, according to a Trump Administration official. The other 25% Section 301 tariffs that consist of Lists 1 through 3 will remain in effect until there is a Phase two deal, negotiations for which likely will not conclude until after the U.S. presidential election in November 2020.
Husch Blackwell is closely monitoring this situation and will provide updates as more information becomes available. If you or your company has any questions regarding the phase one U.S.-China trade deal, please contact our International Trade and Supply Chain team.