Expectations soar as US-China gear up to sign phase one trade deal

The signing of the "phase one" trade deal will also mark the beginning of reforms to China's long-standing policy of technology transfer by foreign companies

The United States and China in all likelihood will be signing the "phase one" trade deal on Wednesday, thus putting an end to almost two years of tariff war between the world's two biggest economies. The signing of the "phase one" trade deal also means billions of dollars of purchase by China.

However, it is still not clear what the exact things are that the two countries are agreeing to through the trade deal but investors certainly are upbeat ahead of the signing. That said, the trade deal was long awaited and will certainly ease a lot of the tensions that have been escalating over the past two years.

What to expect from the deal?

US China flag
US China flags Reuters

The signing on Wednesday is expected to be attended by US Treasury Secretary Steven Mnuchin, U.S. Trade Representative Robert Lighthizer and a host of Chinese delegates in Washington. A lot is expected from the trade deal but not much is clear.

However, the signing of the deal promises the beginning of reforms to China's long-standing policy of technology transfer by foreign companies to Chinese companies. This was one of the major reasons for US President Donald Trump to impose higher tariffs on Chinese imports worth billions of dollars. So, it is expected that the "phase one" deal is likely to include the first step of reforms.

According to a United States Trade Representative document, the deal includes large scale exports of US agricultural products. That said, many will be more interested in knowing the structural changes agreed to by China instead of the volume of US exports.

Agricultural produce, seafood expected to benefit first

Trade (Representational picture) Pixabay

According to the USTA, the deal includes massive exports of agriculture produce and seafood. It is still unclear if US tech companies, which have been feeling the heat of the trade war the most, will get benefited from the "phase one" deal.

USTA had also said that the deal includes a commitment by China to purchase a minimum $200 billion worth of US products that includes agricultural and manufactured goods along with food and energy products and services. At the same time the deal reiterates US opposition to currency manipulation. In fact on Monday, the United States dropped its designation of China as a currency manipulator.

Both Chinese and US media has been quoting sources from Washington and Beijing on the specifics of the trade deal. Although the USTA is yet to make the details public, one thing is clear that there has to be a lot of structural changes in this deal in order initiate talks for a "phase two" trade deal.