List 4B Tariffs Averted in 'Phase One' Trade Pact, but 25% Tariffs Remain on Lists 1-3

Several groups expressed frustration that the 25 percent tariffs will remain on the first three tranches of Chinese goods worth $250 billion. There's also obvious anxiety that a comprehensive Phase Two trade agreement may be months away, further prolonging the existing tariffs from going away anytime soon.

"We will begin negotiations on the Phase Two Deal immediately, rather than waiting until after the 2020 Election," tweeted President Donald Trump. "This is an amazing deal for all." Phase One is “an historic and enforceable agreement” that “requires structural reforms and other changes to China’s economic and trade regime in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange,” said the Office of the U.S. Trade Representative.

Sixty-three days passed since the U.S. and Chinese sides announced in mid-October their agreement to put Phase One on paper (see 1910120001). There was "plenty of time" to decide the fate of the List 4B tariffs scheduled to take effect Dec. 15, said USTR Robert Lighthizer then. In the end, List 4B was averted with less than 48 hours to spare.

Removing the Section 301 tariffs was a “core concern of China,” Vice Commerce Minister Wang Shouwen told a Beijing news conference Friday. The U.S. “promised to remove part of the tariffs that have been levied on China, and also increase the tariff exemptions” for Chinese imports, said Wang. “We do hope the U.S. side will earnestly fulfill this commitment.” China in reciprocation will “consider” not imposing the retaliatory tariffs on U.S. goods that were to take effect Sunday, he said.

The formal “signing” of Phase One awaits “legal review, translations, authentication and other necessary procedures,” said Wang. “After that, we will work out arrangements on the place and timing for the signing of the agreement.” The Commerce Ministry “will provide timely updates on the progress,” he said.

The text of Phase One spans nine "chapters," said Wang. Reached after 22 months of negotiations, the agreement will “make a positive impact on the global economy, trade, investment and the financial market,” he said. “As you can see, when the two sides announced this agreement, the global capital market has responded very favorably.”

The U.S, and China held in-depth discussions on boosting IP safeguards, said ministry officials. Phase One addresses the protection of trade secrets and combating pirated and counterfeit goods over e-commerce platforms, they said. It also features measures for enhancing IP enforcement, they said.

Phase One’s “partial tariff rollback” is “welcome news,” said CTA President Gary Shapiro. CTA also is pleased it addresses “critical tech priorities,” such as IP protections and forced technology transfer, he said. Postponing the List 4B tariffs on smartphones, laptops and tablets “may temporarily protect American consumers from price increases,” he said. “But it doesn’t resolve market uncertainty or return the billions of dollars our nation is already paying in tariffs.”

The Information Technology Industry Council is “pleased” Phase One “begins to roll back harmful tariffs, increases IP and tech transfer protections for American companies, further opens China’s financial market, and stabilizes this critical trade relationship,” said CEO Jason Oxman. “We encourage both countries to use this positive momentum to finalize a broader agreement that meaningfully addresses China’s longstanding unfair trade practices.”

Phase One “provides needed relief for the semiconductor industry by reducing uncertainty, easing some harmful tariffs, and not adding more,” said Semiconductor Industry Association CEO John Neuffer. “We urge both sides to avoid further escalations that could undo this progress.” The U.S. and China should use Phase One as “a springboard to a more comprehensive deal that more effectively protects intellectual property and stops market-distorting government subsidies,” he said.

The Telecommunications Industry Association thinks Phase One is “a first step toward addressing systematic issues and could lead to meaningful gains for consumers and companies on both sides,” said CEO David Stehlin. "TIA hopes that faithful implementation of this Phase One agreement will build trust and encourage China to address the unfair trading practices that limit market access for global technology firms operating in China.”

The U.S. and China “for the first time in months” are “moving in the right direction on tariffs,” said David French, National Retail Federation senior vice president-government relations. “Tariffs create uncertainty and costs for American retail supply chains, and the trade war won’t be over until they are eliminated completely.”

Phase One is “a very positive development,” said Myron Brilliant, U.S. Chamber of Commerce executive vice president-international affairs. Suspending the List 4B tariffs is “a welcome gift for American businesses and consumers,” he said. The Chamber urges the Trump administration “to keep its eyes on the prize,” said Brilliant. “We call upon both governments to continue working diligently toward a final agreement within six months.”