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Kenny Fisher
U.S. Stock Markets

The U.S. and China will sign the ‘Phase 1’ agreement in Washington on January 15th in Washington. The two countries reached the limited trade deal in December, after several rounds of protracted and difficult negotiations. In December, U..S. President Trump said that the deal would be signed in January, but there was some apprehension, as there was no confirmation on China’s part until Thursday.

The Phase 1 deal is the first step towards a comprehensive trade deal between the U.S. and China, and Trump has indicated that he plans to travel to China to commence talks on the next phase. After high-level negotiations failed to reach an overall agreement, negotiators switched to a “salami-style” approach, in order to reach a limited agreement.

The U.S. has suspended tariffs that were scheduled to take effect in December, and under the agreement, some tariffs will be lowered. As well, China has agreed to purchases more agricultural and manufactured goods from U.S. exporters. President Trump has said that under Phase 1, Chinese purchases of U.S. goods would increase to $50 billion annually, double the amount before the trade war.  However, Chinese officials have not confirmed this and have been vague as to China’s commitments under the deal. The details of the agreement remain unclear, as a text of the agreement has not been made public.

The Phase 1 accord is certainly a positive start to tackling the trade war between China and the United States. The trade dispute between the world’s two largest economies has dampened global growth and hurt the manufacturing and export sectors of both countries. At the same time, the agreement does not address longstanding complaints from the United States over unfair Chinese trade policies – particularly, government subsidies and the theft of U.S. intellectual property. An agreement on these items will be difficult to reach, but investors are hopeful that the momentum of a limited Phase 1 agreement will enable negotiators to reach another agreement in the near future.

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