China said Friday it has agreed the text of a phase one trade agreement with the United States, marking one of the most significant advances of the 18 month long trade war between the world's two biggest economies.
China's Vice Commerce Minister told a special press briefing in Beijing that "major progress" has been made in recent trade negotiations and that the U.S. will follow-up on its promise to cancel previously imposed tariffs on China-made goods on a phased in basis.
“President Trump has focused on concluding a Phase One agreement that achieves meaningful, fully-enforceable structural changes and begins rebalancing the U.S.-China trade relationship," U.S. Trade Representative Robert Lighthizer said in a statement. "This unprecedented agreement accomplishes those very significant goals and would not have been possible without the President’s strong leadership.”
The USTR said it will maintain a 25% tariff on about $250 billion worth of China-made goods, along with a 7.5% levy on another $120 billion in Chinese imports.
President Donald Trump Tweeted shortly afterwards that tariffs set to kick in on December 15 on $160 billion worth of China-made goods would be cancelled, and talks on a phase 2 agreement would begin immediately.
The Dow Jones Industrial Average jumped 130 points higher immediately following the Commerce Ministry statement, taking the benchmark to a fresh record high and extending its year-to-date gain past 20%, before retreating into the red amid questions of the detail of the agreement reached. The S&P 500, meanwhile, was marked 4 points lower at 3,163.25 points.
China's statement on tariff reductions, however, runs counter to an earlier Tweet from President Trump, who said reports of a large tariff rollback were "fake news".
The U.S. has imposed tariffs on $360 billion worth of China made goods over the past 18 months, with a further levy of 15% scheduled to kick-in on a fresh basket of consumer products on December 15.
"The two governments reaching an agreement on a Phase I deal is a very positive development,” said Myron Brilliant of the U.S. Chamber of Commerce. “With substantial tariff increases set to kick in just days before the holidays, relief from those tariffs and the higher costs they impose on consumer goods and services is a welcome gift for American businesses and consumers."
"The reduction of tariffs imposed in September is also a good step. This agreement creates greater certainty for American businesses, after months of uncertainty, as they plan for the year ahead,” Brilliant added.
Chin'as Vice Agricultural Minister said it will import more U.S. wheat and corn as part of the agreement, but did not place an amount on the commitment, saying only that imports wouldn't create shocks for the domestic market.
The Wall Street Journal's report had indicated that China would agreed to $50 billion worth of agricultural purchases next year, in exchange for the suspension of the December 15 tariffs, while China's Vice Finance Minister said cancelling previous tariffs was "core" to his country's concerns.