The U.S.-China trade deal is moving ahead—in spite of everything

August 25, 2020, 9:42 AM UTC

The U.S. and China are finally talking.

On Tuesday, trade negotiators from the U.S. and China spoke over the phone to review progress on phase I of the trade deal, according to government officials in both countries. The disclosures eased concerns that the worsening state of U.S.-China relations would interfere with the agreed-upon truce.

Last week, U.S. President Donald Trump said he delayed the talks, which were scheduled for Aug. 15, over his broader frustrations with China and publicly questioned whether the two sides would continue to engage in trade negotiations at all.

“We’ll see what happens,” Trump said last week in response to a question on whether the U.S. would pull out of the trade deal.

The pact, signed in January, aimed to bring to an end the U.S.-China trade war that began in 2018. In so-called phase I of the deal, China agreed to purchase record levels of American products in 2020 and 2021 in exchange for the U.S. cutting trade war tariffs. But halfway through 2020, the pace of China’s purchases is behind where it should be, which fueled speculation that the agreement was at risk of falling apart.

Despite the shortcoming, both sides seemed determined on Tuesday to assure the public—and the markets—that phase 1 is on track.

“Both sides see progress and are committed to taking the steps necessary to ensure the success of the agreement,” the Office of the United States Trade Representative said in a statement.

The USTR’s brief statement also confirmed what the parties discussed: China’s purchase commitments related to the deal, steps the Chinese government is taking to protect American intellectual property in China, and how to create a freer business environment for American multinationals in China.

Likewise, China’s commerce ministry said the two sides held a “constructive dialogue” and agreed to “create conditions” to implement the trade deal.


The Tuesday talks marked a rare moment of cooperation between the two powers, whose deteriorating relations over the pandemic, Hong Kong, and human rights, at times, have appeared to put the trade pact at risk.

“I don’t want to deal with them right now,” Trump said last week when the talks with China were delayed. “What China did to the world [with COVID-19] was unthinkable,” he said.

What’s more, China’s progress toward its phase 1 pledges appeared to be off-track.

The phase I trade deal called on China to ramp up purchases of American goods by a combined $200 billion in 2020 and 2021 compared to pre-trade war levels in 2017. Through the first half of 2020, however, China was far behind on the commitments, according to the Peterson Institute for International Economics’ trade deal tracker.

PIIE said that through June, China had imported $40.2 billion of American goods, less than half of what it would need to meet its requirements. China’s purchase commitments have lagged across industries, from agricultural products to manufactured goods.

China is furthest behind on its commitment to increase American energy imports. Through June, China had only imported 5% of the $25.3 billion worth of energy products it agreed to buy from the U.S. in 2020.

There are some signs now that China is attempting to make up the deficit.

U.S. oil exporters say they are readying to send a record level of crude exports to China in September, and U.S. agricultural officials say that agricultural exports to China have been on the rise in the last few weeks.

Prior to the talks on Tuesday, Chinese trade deal negotiators had reportedly vowed to bring up another contentious issue: Trump’s recent decision to ban Chinese apps TikTok and WeChat in the U.S. Neither side said whether the apps were discussed on Tuesday. On Monday, Chinese tech giant Bytedance, which owns TikTok, announced that it was suing the U.S. government over the ban.

Even if they were narrowly focused, Tuesday’s talks represented one of the first friendly encounters between the U.S. and China in months and, shortly after the news broke, markets worldwide signaled relief.

“I think both sides recognize that [the trade deal] is really the glue that is holding the relationship together,” Greg Gilligan, chairman of the American Chamber of Commerce in Beijing, recently told Bloomberg. “There’s not an awful lot of other channels of communication that are working well.”