What Phase One Means for the U.S.-China Relationship

Sarah Ouyang ’22

On Wednesday, January 15, President Trump and Chinese Vice Premier Liu He met in the White House to sign a trade deal called “Phase One” as part of a wider negotiation that may span months or years. The public reaction to this agreement mostly expressed confusion and shock from both sides of the political spectrum as reporters wondered, aghast, why Trump thinks this is “the biggest deal anybody has ever seen.” [1]


The deal is fundamentally to reduce U.S. tariffs on Chinese goods, while China, in return, will buy more American products. They will also consider reducing their brutal terms on which foreign companies conduct commerce, including negligence of “U.S. complaints about intellectual property practices.” [2]


In the next two years, China will spend at least $200 billion on American goods, in addition to purchases in manufacturing, energy and agricultural products. Meanwhile, the U.S. will reduce tariff rates (set in September) by 50% on $120 billion worth of Chinese products. Regarding currency, China has pledged to “refrain from competitive devaluation” on penalty of increased U.S. tariffs. Both countries have agreed to continue discussing how to enforce these terms, but they have already established a basic process for penalizing violations with tariffs.


Previously, U.S. companies were forced to share their technology with Chinese companies in order to access the Chinese market or obtain licenses and administrative approvals. This resulted in several protests from U.S. companies, calling for stricter protection of copyrights and patents. In Phase One, China has committed to removing such policies, as well as ceasing to support “outbound investment aimed at acquiring foreign technology.” [2]


However, the deal fails to effectively address several significant issues on both sides. First, China’s “Made in China 2025” plan threatens American technology; the program is intended to help the growth of Chinese tech companies, but Washington claims this is solely due to unfair government subsidies. Second, the U.S. has been encouraging its allies to boycott the Chinese tech company Huawei as a result of the trade war. The deal does not acknowledge this problem, which means the Huawei ban will continue. And finally, what is missing from the deal, as aforementioned, is enforcement. With no rules on interpretation and violation, any hope of success is fleeting. [3]


Therefore, it should come as no surprise that magazines such as The New Yorker lament the ambiguity of Phase One, which leaves uncertain the fate of future negotiation. The deal seems, as Business Insider puts it, “designed to implode.” The vague language, for one, renders its terms “squishy” and “fungible.” In addition, the Democratic party does not even approve of the deal; this ascertains failure should the “political winds” shift positions. [4]


National Review magazine finds the lack of enforcement especially concerning, since any attempts at imposing these rules on China will likely implode on the U.S. The Trump “will likely accept continued malfeasance (on technology theft, for example), in order to protect the trade balance.” The conservative magazine worries that this, as well as the questionable focus on agricultural exports, gives China too much of an advantage on the U.S. [5]


On the other hand, Trump’s chief economic adviser, Larry Kudlow, deems this deal “historic” and hopes it will “help grow our economy faster.” [6] Kudlow promises they have established “very strong enforcement provisions” and “will take proportionate actions” if China violates the deal in any way. He and the rest of Trump’s administration seem to feel confident in its success. However, although the deal signifies an attempt to compromise between the nations, the media’s valid speculations on potential disastrous consequences show skepticism about the deal’s actual effectiveness. The public will continue to hold its breath and hope both governments will work sensibly towards an agreeable outcome to this rocky trade relationship — for the sake of both economies.


[1] newyorker.com/…/the-uneasy-truce-of-trumps-trade-deal-with-china

[2] reuters.com/…/whats-in-the-us-china-phase-1-trade-deal-idUSKBN1ZE2IF

[3] bbc.com/news/business-51130434

[4] businessinsider.com/trump-china-phase-one-tariff-trade-deal-enforcement-mechanism-implode-2020-1

[5] nationalreview.com/…/china-trade-agreement-trump-obsession-with-trade-deficit-front-and-center

[6] foxnews.com/…/larry-kudlow-china-trade-deal-defends-american-economy