U.S., China announce a trade agreement - again. Here's what it means

San Francisco Chronicle​

5 hours ago

WASHINGTON (AP) — The U.S. and China have reached an agreement — again — to deescalate trade tensions. But details are scarce, and the latest pact leaves major issues between the world's two biggest economies unresolved.
President Donald Trump said late Thursday that a deal with China had been signed "the other day.'' China's Commerce Ministry confirmed Friday that some type of arrangement had been reached but offered few details about it.
Sudden shifts and a lack of clarity have been hallmarks of Trump's trade policy since he returned to the White House determined to overturn a global trading system that he says is unfair to the United States and its workers.
He's been engaged for months in a battle with China that has mostly revealed how much pain the two countries can inflict on each other. And he's racing against a July 8 deadline to reach deals with other major U.S. trading partners.
The uncertainty over his dealmaking and the cost of the tariffs, which are paid by U.S. importers and usually passed on to consumers, have raised worries about the outlook for the U.S. economy. And although analysts welcomed the apparent easing of tensions with China, they also warned that the issues dividing Washington and Beijing are unlikely to be resolved anytime soon.
What did the two sides agree to?
U.S. Treasury Secretary Scott Bessent said Friday that the Chinese had agreed to make it easier for American firms to acquire Chinese magnets and rare earth minerals critical for manufacturing and microchip production. Beijing had slowed exports of the materials amid a bitter trade dispute with the Trump administration.
Without explicitly mentioning U.S. access to rare earths, the Chinese Commerce Ministry said that 'China will, in accordance with the law, review and approve eligible export applications for controlled items. In turn, the United States will lift a series of restrictive measures it had imposed on China.''
The Chinese have complained about U.S. controls on exports of advanced U.S. technology to China. But the ministry statement did not specifically say whether the United States planned to ease or lift those controls.
In his interview on Fox Business Network's 'Mornings with Maria,' Bessent mentioned that the United States had earlier imposed 'countermeasures'' against China and 'had held back some vital supplies for them.''
"What we're seeing here is a de-escalation under President Trump's leadership,'' Bessent said, without spelling out what concessions the United States had made or whether they involved America's export controls.
Jeff Moon, a trade official in the Obama administration who now runs the China Moon Strategies consultancy, wondered why Trump hadn't disclosed details of the agreement two days after it had been reached.
'Silence regarding the terms suggests that there is less substance to the deal than the Trump Administration implies,″ said Moon, who also served as a diplomat in China.
Wait. This sounds familiar. How did we get here?
The agreement that emerged Thursday and Friday builds on a "framework'' that Trump announced June 11 after two days of high-level U.S.-China talks in London. Then, he announced, China had agreed to ease restrictions on rare earths. In return, the United States said it would stop seeking to revoke the visas of Chinese students on U.S. college campuses.
And last month, after another meeting in Geneva, the two countries had agreed to dramatically reduce massive taxes they'd slapped on each other's products, which had reached as high as 145% against China and 125% against the U.S.
Those triple-digit tariffs threatened to effectively end trade between the United States and China and caused a frightening sell-off in financial markets. In Geneva, the two countries agreed to back off and keep talking: America's tariffs went back down to a still-high 30% and China's to 10%. That led to the talks in London earlier this month and to this week's announcement.
Where does all this leave U.S.-China economic relations?
If nothing else, the two countries are trying to ratchet down tensions after demonstrating how much they can hurt each other.
'The U.S. and China appear to be easing the chokeholds they had on each other's economies through export controls on computer chips and rare earth minerals, respectively,' said Eswar Prasad, professor of trade policy at Cornell University. "This is a positive step but a far cry from signaling prospects of a substantial de-escalation of tariffs and other trade hostilities.''
Trump launched a trade war with China in his first term, imposing tariffs on most Chinese goods in a dispute over China's attempts to supplant U.S. technological supremacy. Trump's trade team charged that China was unfairly subsidizing its own tech companies, forcing U.S. and other foreign companies to hand over sensitive technology in exchange for access to the Chinese market and even engaging outright theft of trade secrets.
The squabbling and negotiating of the past few months appear to have done little to resolve Washington's complaints about unfair Chinese trade practices and America's massive trade deficit with China, which came to $262 billion last year.
This week's agreement 'includes absolutely nothing related to the U.S.'s concerns regarding China's trade surplus or non-market behavior,'' said Scott Kennedy of the Center for Strategic and International Studies. 'If the two sides can implement these elements of the ceasefire, then they could begin negotiations on issues which generated the initial escalation in tensions in the first place.''
What is happening with Trump's other tariffs?
Since returning to the White House in January, Trump has made aggressive use of tariffs. In addition to his levies on China, he has imposed "baseline'' 10% taxes on imports from every country in the world . And he's announced even higher taxes — so-called reciprocal tariffs ranging from 11% to 50% — on countries with which the United States runs a trade deficit.
But after financial markets sank on fears of massive disruption to world trade, Trump suspended the reciprocal levies for 90 days to give countries a chance to negotiate reductions in their barriers to U.S. exports. That pause lasts until July 8.
On Friday, Bessent told Fox Business Network that the talks could extend beyond the deadline and be 'wrapped up by Labor Day'' Sept. 1 with 10 to 12 of America's most important trading partners.
Trump further played down the July 8 deadline at a White House press conference Friday by noting that negotiations are ongoing but that 'we have 200 countries, you could say 200 countries-plus. You can't do that.'
Instead of new trade deals, Trump said his administration would in coming days or weeks send out a letter where 'we're just gonna tell them what they have to pay to do business in the United States.''
Separately, Trump took sudden aim at Canada Friday, saying on social media that he's immediately suspending trade talks with that country over its plan to impose a tax on technology firms next Monday. Trump called Canada's digital services tax 'a direct and blatant attack on our country.'
The digital services tax will hit companies like Amazon, Google, Meta, Uber and Airbnb with a 3% levy on revenue from Canadian users. It will apply retroactively, leaving U.S. companies with a $2 billion bill due at the end of the month.