The U.S. and China agreed on the outlines of a partial trade accord on October 11th that President Donald Trump said he and China’s Xi Jinping could sign as soon as November.

As part of the deal, China would significantly step up purchases of U.S. agricultural commodities, agree to certain intellectual-property measures and concessions related to financial services and currency, Trump said on October 11th at the White House. In exchange, the U.S. will delay a tariff increase due the week of October 14th as the deal is finalized.

The agreement, which will take three to five weeks to put on paper, marks the first breakthrough in the 18-month trade war that has hurt the economies of both nations. Importantly, Trump said the deal was the first phase of a broader agreement.

While the limited agreement may resolve some short-term issues, several of the thorniest disputes remain outstanding. U.S. goals in the trade war centre around accusations of intellectual-property theft, forced technology transfer and complaints about Chinese industrial subsidies.

Equities advanced globally on Friday October 11th amid growing conviction that the U.S. and China would negotiate a trade truce. Trump tweeted earlier that “good things” were happening in the two days of meetings — and that if the countries did reach an agreement, he would be able to sign it without a lengthy congressional approval process.

On October 10th and earlier October 11th, Liu and U.S. Trade Representative Robert Lighthizer held the first senior-level discussions between Washington and Beijing since a previous agreement fell apart in May and tariffs were raised in the months after.

The U.S. was threatening to increase tariffs on October 15th on about US$250 billion of Chinese imports to 30% from 25%. More duties on US$160 billion of Chinese products were targeted for Dec. 15.

The threat of those import taxes on U.S. consumers, falling around the holiday season, raised the prospect that the U.S. economy would slide toward a recession heading into Trump’s 2020 reelection bid. The American manufacturing industry, which Trump vowed in 2016 to revitalize, is already contracting in part because of the trade war.

China in recent weeks had already discussed buying more U.S. products such as soybeans, pork and wheat. Some traders remained skeptical that buying soybeans from the U.S. represented a significant breakthrough in the overall trade talks, Bloomberg reported October 11th.

Earlier on October 11th, Trump indicated in a Twitter post that if the countries did reach an agreement, he would be able to sign it quickly.

Senator Ronald Wyden, the ranking Democrat on the Finance Committee that has jurisdiction over trade policy, pushed back on Trump’s tweet in a statement October 11th to Bloomberg News: “Donald Trump should know that any meaningful trade deal is only legitimate because of the authority granted to him by Congress, and that authority can be taken away,” he said.

Under the U.S. Constitution, Congress holds power over international trade. For decades, it has legally delegated trade-negotiating authority to the executive branch. Lawmakers in recent months have grown increasingly wary of what they see as Trump’s abuse of that authority and discussed ways to claw it back, citing the president’s many unilateral tariff measures and a lack of transparency in negotiations.

Source: Financial Post