President Trump and Chinese negotiators signed a hard-fought trade agreement on Wednesday that provides big wins for U.S. farmers, energy companies and financial-services firms, a historic breakthrough in the lopsided business dealings between the world’s two biggest economies that Mr. Trump achieved through his unconventional use of tariffs.
The president and Chinese Vice Premier Liu He signed the “phase one” agreement during a White House ceremony, after nearly two years of trade tensions that saw both sides impose escalating tariffs on hundreds of billions of dollars’ worth of each other’s products.
The 86-page agreement calls for China to increase its purchases of U.S. goods by more than $200 billion over the next two years, from soybeans to automobiles. It also adds new restrictions against Beijing forcing U.S. companies operating in China to disclose their technologies and against devaluing its currency.
Mr. Trump pronounced the deal “a landmark agreement” as he shook hands with Mr. Liu, China’s top trade official, and other Chinese dignitaries. The president said the deal is a “momentous step” that puts the two countries on the path “toward a future of fair and reciprocal trade.”
“Together we are righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers and families,” Mr. Trump said from the East Room, which was filled with lawmakers and business leaders. The agreement takes effect in 30 days.
“It is good for China, the United States and for the world,” Mr. Liu said. “China will open itself even wider.”
All three major U.S. financial markets reached record highs after the deal was signed. The Dow Jones Industrial Average closed above 29,000 points for the first time in its history, finishing up 0.3% to end the day at 29,030.
The deal, which creates a larger market for U.S. farmers after they endured Chinese boycotts, will keep in place most U.S. tariffs on Chinese goods to compel Beijing to keep its promises. The agreement postpones thorny questions about China’s economic manipulation, such as industrial subsidies, for a planned “phase two” negotiation.
“We’re leaving tariffs on,” Mr. Trump said. “I will agree to take those tariffs off, if we agree to do Phase Two. I’m leaving them on, because otherwise we have no cards to negotiate with.”
Many business leaders expressed the view that the main benefit of the deal was to eliminate the threat of more tariffs.
The ceremony provided a stark contrast to partisan impeachment proceedings taking place simultaneously on Capitol Hill. At one point during the victory lap for his economic agenda, Mr. Trump interrupted his own hour-long speech to warn that some House lawmakers in the audience might need to return to the Capitol for a vote on sending the articles of impeachment to the Senate.
“Some of the congressmen may have to go out and vote — it’s on the impeachment hoax,” Mr. Trump said.
Mr. Trump said previous U.S. politicians have allowed China to “pillage” the U.S. economy, with America racking up nearly $5 trillion in cumulative trade deficits with Beijing since China joined the World Trade Organization in 2001.
“It’s probably the biggest reason I ran for president,” he said. “There has to be a certain reciprocity.”
He said the deal includes “groundbreaking provisions” on protecting U.S. intellectual property.
It was the first such deal ever with China since President Richard M. Nixon opened diplomatic ties with the communist nation in 1972. Henry Kissinger, who was Nixon’s secretary of state at the time, had a front-row seat for Wednesday’s ceremony.
Vice President Mike Pence said of the deal, “the greatest impact may well be on American agriculture.”
The president singled out several Republican lawmakers from farming states in the audience, saying “the farmers are going to be so happy.” The administration has approved nearly $30 billion in bailouts for farmers and ranchers who have been hurt by the lost Chinese markets.
There is plenty of skepticism in the U.S. about whether China will live up to its part of the bargain. Administration officials thought they had reached an agreement with Beijing last spring, only to have the Chinese back out of a commitment to change their laws to reflect new trade requirements.
Former Iowa Lt. Gov. Patty Judge said farmers are waiting to see if the deal stabilizes prices and makes up for a deficit created by tariffs and flooding in early 2019, or if it amounts to smoke and mirrors.
“It’s complicated,” Mrs. Judge, a Democrat who also served as Iowa agriculture secretary, told The Washington Times. “It looks like definitely this is a commitment from China, taking quite a lot of agricultural products. That’s a good thing.”
But she added, “we’re going to have to see how it plays out,” noting that China hasn’t lived up to its commitments in the past.
She said heartland farmers are a bit wary of Mr. Trump’s aims, too, pointing to his painful use of tariffs and his administration’s decision to grant ethanol waivers to oil refineries.
“I think they definitely have a right to be a little miffed,” she said. “He’s played political games with us.”
The new agreement uses the word “enforcement” 42 times. For example, under a section allowing for criminal penalties, the document states: “The parties agree to ensure effective protection for trade secrets and confidential business information and effective enforcement against the misappropriation of such information.”
Mr. Trump staked a large part of his 2016 campaign — and his reelection bid — on rewriting U.S. trade deals in a way that foregoes multilateralism and relies instead on his face-to-face negotiating skills. He said it would tilt the landscape in favor of American workers, after millions of lost factory jobs iover several decades.
Mr. Trump said the phase-one deal with China, on top of other deals with South Korea, Japan and North American partners, is a down payment on that promise heading into his 2020 reelection bid.
The president said he would travel to China “soon” to begin negotiations for a more comprehensive deal, but Treasury Secretary Steven T. Mnuchin said no date has been set for phase-two trade talks to begin.
China has agreed to increase its purchases of U.S. agricultural goods by roughly $16 billion per year, reaching a level of about $40 billion annually.
That includes $50 billion in natural gas and crude oil, $75 billion of U.S. manufacturing goods, and $40 billion or more on financial-services products.
Under the agreement, Beijing is allowing U.S. banks and credit card companies to enter China without needing to partner with a Chinese company, long a priority for financial-services firms such as JPMorgan Chase.
Democratic presidential candidate Joseph R. Biden said China is the “big winner” in the deal.
“True to form, Trump is getting precious little in return for the significant pain and uncertainty he has imposed on our economy, farmers, and workers,” the former vice president said. “The deal won’t actually resolve the real issues at the heart of the dispute, including industrial subsidies, support for state-owned enterprises, cybertheft, and other predatory practices in trade and technology.”
And House Speaker Nancy Pelosi said Mr. Trump “inflicted deep, long-term damage to American agriculture and rattled our economy in exchange for more of the promises that Beijing has been breaking for years.” She criticized Mr. Trump for not “standing strong for human rights” against China.
“Americans are left with nothing more than a showy television ceremony to try to hide the complete absence of concrete progress, transparency or accountability in this ‘phase one’ agreement,” she said.
Sen. Rob Portman, an Ohio Republican and former U.S. trade representative who attended the ceremony, said the phase-one agreement resulted from Mr. Trump’s insistence in 2018 to impose tariffs on Chinese goods through Section 301 of the Trade Act of 1974.
“But the agreement will only remain durable over time if it is enforced,” Mr. Portman said. “That is why it is significant that this agreement includes the option to re-impose tariffs should China fail to hold up its new commitments, including preventing the theft of intellectual property.”
Under the deal, if a dispute arises, the two sides would enter a resolution process that should take up to 90 days. Appeals would begin at lower government levels but could be elevated to the U.S. trade representatives and Chinese vice premier to discuss remedies.
If one country thinks the other side took remedial action in “good faith,” it cannot retaliate. If it thinks the action was taken in “bad faith,” then it can withdraw from the deal in writing.
The escape hatch is a way to avoid another all-out trade war.
In China, former Vice Commerce Minister Wei Jianguo told the state-run newspaper Global Times, “The overall signal from the phase-one agreement is much larger than the content of the deal itself.
“It is a boon for the world that the world’s largest and second-largest economies have hit the pause key in the trade war.”
The U.S. agreed to remove its label on China as a currency manipulator, a designation that could have led to more tariffs. The president said the deal has “strong restrictions” on China devaluing its currency.
Mr. Trump decided to wave off tariffs that would have hit nearly $160 billion in Chinese goods — including electronics and other popular items — on Dec. 15.
Existing tariffs on $250 billion in goods remain, while levies on another $110 billion will be reduced from 15% to 7.5%.
Senate Minority Leader Charles E. Schumer said Mr. Trump folded under pressure and accepted a “weak and feckless” deal ahead of the 2020 campaign.
From the Capitol, Mr. Schumer said the initial-phase pact had a “stunning lack of substance” and would harm workers over time since it does not address the Chinese government’s massive subsidies of domestic industries, cyber theft from American companies nor farmers who have already gone bankrupt from the trade war.
The New York Democrat also said China’s commitment to buy tens of billions of dollars in farm products is shaky at best.
“It’s dubious that this will happen,” Mr. Schumer told reporters.
He said he wants Mr. Trump to start negotiations on phase two immediately, rather than letting critical items languish beyond the 2020 elections.
Mr. Trump, however, says he secured major concessions in the initial stage and that he will be well-positioned to demand much more in “phase two” if he wins a second term in November.
Michael Pillsbury, director of the Center on Chinese Strategy at the Hudson Institute, met with the president in a smaller group after the signing ceremony and said Mr. Trump has been “very concerned about the growth of Chinese military power.”
“We don’t want an arms race with China,” he told Fox Business Network. “That’s what we may have headed off today with this agreement.”
Competitive Enterprise Institute senior fellow Ryan Young said the deal “will diminish damage caused by any further tariffs, but it comes at a cost.”
“American consumers and businesses will still pay tariffs on 40 percent of Chinese imports that were mostly tariff-free just a few years ago,” he said. “Consumers are worse off overall, and those still-new tariffs now risk becoming normalized because neither Trump nor Congress seemed inclined to roll them back, anyway, and now they’re also part of an international agreement. The agreement’s embrace of managed trade rather than free trade is its biggest shortcoming.”
The administration rejected the notion that by mandating purchases, the deal amounts to “managed trade” that could push the communist Chinese government in the wrong direction.
A senior official said the purchases will be made at market prices and reflect real demand and need within China.