Wednesday is still likely to bring the signing of a Part 1 agreement in the U.S.-China trade war. But the public document is likely to have even fewer details than expected recently and to leave existing tariffs in place until after the Presidential election in November. In December the United States agreed to postpone a new round of tariffs and and to reduce the tariff rate on about $120 billion in Chinese exports as part of the impending deal. But that still left uncertain the fate of higher tariffs on about $260 billion in Chinese exports. Now, “informed sources” say, those tariffs are likely to remain in effect for at least the next 10 months. That time period will give the United States a chance to review progress on the agreement and potentially reduce tariffs imposed on more than $360 billion in Chinese exports during the trade war.
It’s not clear what exactly will be included in the Part 1 agreement–which is part of what worries Wall Street today. U.S. officials have said they will release the text of the entire 86-page agreement when it is signed. “The only non-public component of the agreement is a confidential annex with detailed purchase amounts, which has been previously described,” U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin said in a joint email. “There are no other oral or written agreements between the U.S. and China on these matters, and there is no agreement for future reduction in tariffs.”
In other words there’s no public blueprint for removing existing tariffs and all the markets have seen so far is a slight reduction in some tariffs from 15% to 7.5% although other tariff rates were not reduced.
To the market today that looks like there will no further tariff reductions until a Part 2 deal–after November if ever.
And that keeps a huge drag on global economic growth in place for longer than many investors had hoped.