The new deal commits China to import manufacturing equipment, agriculture goods, energy and services worth an additional $200 billion over two years
The signing of the new deal on Wednesday between the US and China, after two years of trade war, was hailed as a "momentous step" by US President Donald Trump. But analysists think the US could make little gain from the losses their economy suffered over the years.
BBC claims Donald Trump "used the deal" as an opportunity to "claim it as an achievement" in the upcoming presidential election. Trump, for his own political gain "changed the game" he began – unrepentant about the losses American companies and consumers have already suffered.
Farmers were hurt most when US agricultural exports to China fell by about $21 billion because of the trade war. The new deal commits China to import manufacturing equipment, agriculture goods, energy and services worth an additional $200 billion over two years.
Of these imports, $40 billion will comprise US agricultural products – a good news for American farmers. However, analysts are sceptical about the practical implication of this move, as it will remain valid for only two years and China agreed to this on the condition that purchases will depend on market demand. This condition gives China the floor to go to other countries.
Furthermore, China has not lifted tariffs on American-grown produce, which makes it more expensive to Chinese importers than imports from other countries.
Of the $200 billion, the other $52.4 billion is for purchasing energy products including liquefied natural gas (LNG), crude oil, refined products and coal – a good sign for the energy sector of the US. China, the world's fastest-growing buyer of fuel, did not import any cargo from the US since February 2019, reports the Los Angeles Times.
The critics doubt if the US consumers and manufacturers will benefit from the tariff reduction deal as the Trump administration committed to reduce duties from 15 to 7.5 percent on $120 billion worth Chinese products, but 25 percent tariffs on Chinese products of $250 billion is still in place, reports China Briefing.
However, the deal emerged as an opportunity to China to get back the "loosening market access" to the US financial and automobile firms, according to BBC.
Though the deal is not a "win-win" for the economies of the two superpowers, it has boosted stock markets worldwide and oil prices.
One of the most important deal in the pact is "protecting the intellectual property rights" by China – for which Trump took the hard line of putting high tariffs on Chinese products and blacklisting a few Chinese mobile companies.
According to a former top White House trade official, China's commitment to crack down on intellectual property thefts will bring good to both economies. "Better intellectual property protection means more investment in China," he told CNBC.
As foreign firms will enjoy the same favourable policies as domestic ones, the protection of intellectual property rights will attract more foreign investors to set up factories in China.
Another gain for China is that Trump had accused China of "manipulating" its currency even before he became president, and the US labelled China as a "currency manipulator" at the height of the trade war last year. But it removed that label earlier this month before signing the pact, reports Gulf News.
In the deal, both parties have agreed not to devalue their competitive currencies and be transparent about their interventions in exchange market. But economists said how far the Chinese will comply with the promise remains to be seen.
A gain for the US is China's pledge to step up efforts against counterfeit medicines. The move may help the US pharmaceutical companies protect their branded medicines in developing nations. Under terms of the deal, the brands would be able to seek an order to block any sales of counterfeit medicine until conflicts are resolved, reports Los Angeles Times.
Ultimately, the gains or the losses depend how much the two players comply with the deal.