End of US-China Trade War: What’s in it For Pakistan?

After months of negotiations, The United States and China have signed a trade truce on Wednesday, letting businesses around the globe breathe a sigh of relief.

President Donald Trump and Chinese Vice Premier Liu He signed a deal that will cut some US tariffs on Chinese goods in exchange for Chinese pledges to purchase more American farm, energy and manufactured goods and address US’s complaints about intellectual property practices.

President Trump, who currently faces an impeachment trial and a tough reelection bid later this year, called the agreement “momentous.” But tariffs on hundreds of billions of dollars in imports remain in place, leaving American consumers and businesses to foot the bill.

The “phase one” agreement includes pledges from China to beef up purchases of American crops and other exports, provides protections for US technology, and new enforcement mechanisms. “Today, we take a momentous step, one that’s never taken before with China that will ensure fair and reciprocal trade,” Trump said at the White House signing ceremony.

According to Bloomberg, the deal commits China to do more to crack down on the theft of American technology and corporate secrets by its companies and state entities, while outlining a $200 billion spending spree to try to close its trade imbalance with the US. It also binds Beijing to avoid currency manipulation to gain an advantage and includes an enforcement system to ensure promises are kept.

“Together, we are righting the wrongs of the past.” As Trump ambled through a lengthy commentary on the deal, punctuated by introductions of many officials involved in the negotiations, major networks switched away from the White House to the Congress to show the presence of articles of impeachment in the Senate as the first step towards a trial.

Easing of the US-China trade frictions has boosted stock markets worldwide in recent weeks, as it takes the threat of new tariffs off the table for now.

Trump signed the deal with China’s Vice Premier Liu He, who led Beijing’s negotiations with US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.

Trump also thanked Chinese leader Xi Jinping and said that he will visit China in “the not-too-distant future.” “Negotiations were tough on us,” Trump said, “but they led to this really incredible breakthrough.”

However, he said that he will only remove tariffs “if we’re able to do phase two.”

I’m leaving them on. Otherwise, we have no cards to negotiate with.

In a letter to Trump read by Liu, the Chinese leader said the deal is “good for China, for the US and for the whole world.” However, the most difficult issues remain to be dealt with in “phase two” negotiations, including massive subsidies for the state industry.

Chinese state media greeted the deal with cautious optimism but were fearful that it could fall apart.

English-language Global Times said in an editorial:

It is such a paradox that makes many people worry: Can a preliminary trade agreement, reached during a period when China-U.S. strategic relations are clearly declining, really work.

After announcing the deal on Dec 13, 2019, the United States canceled a damaging round of new tariffs that were due to kick in two days later and also promised to slash in half the 15 percent tariffs on $120 billion worth of consumer goods imposed on Sept

 

What’s in for Pakistan?

Economic and Geopolitical analyst Osama Rizvi is hopeful about the implications of the trade deal on Pakistan.

For countries like Pakistan, this economic scrum between the US and China is very significant. Both countries are one of Pakistan’s largest trading partners. We are diplomatically engaged with China in the firm of CPEC which has a huge economic aspect. But at the same time, we are in the middle of an IMF loan.

He further stated that if anything goes wrong with the Phase One deal (and there are several things that will), Pakistan might see itself in a difficult situation where it may have to pull out a balancing act and keep both countries happy.

As the trade war affects the global economy and therefore global commodity markets, it also affects Pakistan as we are in the middle of an economic turnaround and we need better demand abroad to enhance our exports.



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