President Donald Trump signed a “phase one” trade deal with China on January 15 as the world’s two largest economies try to contain an economic struggle.

Through the deal, the Trump administration aims to resolve some longstanding American concerns about Chinese trade abuses. However, the accord appears to leave questions about how Washington and Beijing will enforce its terms and prevent further tensions.

Highlights of the deal include:

  • It calls for China to submit an “Action Plan to strengthen intellectual property protection” within 30 days of the agreement taking effect, according to the trade pact.
  • The proposal would include “measures that China will take to implement its obligations” and “the date by which each measure will go into effect.”
  • The deal says companies should be able to operate “without any force or pressure from the other Party to transfer their technology to persons of the other Party.”
  • Technology transfers “must be based on market terms that are voluntary and reflect mutual agreement,” it reads.
  • The agreement says China will increase purchases of U.S. manufacturing, energy and agricultural goods and services by at least $200 billion over two years.
  • It makes commitments to try to root out the sale of counterfeit goods.
  • The deal includes provisions to boost Chinese market access to financial services firms.
  • Ahead of the signing, the Trump administration also revoked its decision to label China a currency manipulator.

Prior to the signing, Bank of Canada Governor Stephen Poloz said it’s too early to tell whether recent improvements on the global trade front will lead to stronger trade and investment.

Poloz said it “remains to be seen” how Canadian business will respond to the preliminary U.S.-China trade pact. The implications for Canada are uncertain. It’s not clear whether any more of the new tariffs imposed on China will be rolled back, and there are worries the U.S. could turn its focus to the European Union, he said. A lot of damage has already been done, and these losses from the trade conflict are likely to be permanent even if growth picks up.

“It is understandable that companies are reluctant to make big investments in this setting,” Poloz said in prepared remarks provided to reporters. “On the surface, there has been some improvement on this front lately, although it remains to be seen whether this will lead to a recovery of trade and investment.”

The remarks come two weeks before the Bank of Canada’s first interest rate decision of the year, on Jan. 22. Poloz ended 2019 with the highest policy rate among major advanced economies at 1.75%, and is expected to hold that title until his seven-year term ends in June. The Bank of Canada has cited two big reasons for resisting the global easing trend: the nation’s inflation has been near its 2% target for well over a year and policy makers are wary of fuelling further some of the highest household debt levels in the world.

In the remarks, Poloz cited four key areas that are top of mind for the Bank of Canada ahead of the decision: global trade policy developments, labour and housing markets, assessment of the economy’s capacity following investment revisions, and recent moves in financial markets.

Source: CNBC
Source: Financial Post
Source: Financial Post