US-China Trade War: What's The 90-Day Deal?

The US-China trade relations have been a rollercoaster, guys! For a while there, it felt like every other day we were hearing about new tariffs, escalating tensions, and potential economic fallout. Amidst all the uncertainty, the so-called "90-day deal" emerged as a beacon of hope, a temporary truce in the trade war. But what exactly was this deal, what did it aim to achieve, and what ultimately became of it? Let's dive in!

What Sparked the Trade War?

Before we get into the specifics of the 90-day deal, let's quickly recap what led to this whole trade kerfuffle in the first place. The US, under the Trump administration, had several grievances with China's trade practices. These included:

• Trade Imbalance: The US had a significant trade deficit with China, meaning it was importing far more goods from China than it was exporting. The US wanted to reduce this deficit.
• Intellectual Property Theft: The US accused China of widespread intellectual property theft, claiming that Chinese companies were stealing American trade secrets and technology.
• Forced Technology Transfer: The US alleged that China was forcing American companies to transfer their technology to Chinese companies as a condition for doing business in China.
• Market Access: The US argued that China's markets were not as open to American companies as the US markets were to Chinese companies.
• Subsidies: The US criticized China's subsidies to its state-owned enterprises, arguing that these subsidies gave Chinese companies an unfair advantage.

To address these concerns, the US began imposing tariffs on billions of dollars worth of Chinese goods. China retaliated with its own tariffs on American products, and the trade war was officially underway. The economic impacts were felt across various sectors, affecting businesses, consumers, and global markets.

The 90-Day Truce: A Pause in the Action

In December 2018, during the G20 summit in Buenos Aires, Argentina, Presidents Trump and Xi Jinping agreed to a temporary ceasefire. This agreement, often referred to as the "90-day deal," involved a pause in the planned escalation of tariffs. The idea was to provide a window of opportunity for the two countries to negotiate a comprehensive trade agreement that would address the underlying issues fueling the trade war. This temporary truce brought a sigh of relief to many businesses and investors, who had been grappling with the uncertainty and disruption caused by the escalating tariffs.

The key elements of the 90-day deal were:

• No New Tariffs: The US agreed not to increase tariffs on $200 billion worth of Chinese goods from 10% to 25% on January 1, 2019. This was a crucial concession that prevented further escalation of the trade war.
• Negotiations: Both countries committed to engaging in intensive negotiations to resolve their trade disputes within 90 days. The aim was to reach a comprehensive agreement on issues such as intellectual property protection, forced technology transfer, non-tariff barriers, cyber theft, services, and agriculture.
• Chinese Purchases: China agreed to purchase a substantial amount of agricultural, energy, industrial, and other products from the United States to reduce the trade imbalance. This was seen as a goodwill gesture and a way to address one of the US's primary concerns.

What Were the Goals of the 90-Day Deal?

The 90-day deal had several key objectives:

• De-escalate Tensions: The primary goal was to de-escalate the trade war and prevent further escalation of tariffs, which were hurting businesses and consumers in both countries.
• Negotiate a Comprehensive Agreement: The deal aimed to provide a framework for negotiating a comprehensive trade agreement that would address the underlying issues causing the trade war. The hope was that a lasting agreement could be reached within the 90-day timeframe.
• Address US Concerns: The deal sought to address specific US concerns, such as intellectual property theft, forced technology transfer, and market access barriers.
• Reduce Trade Imbalance: China's commitment to purchase more US goods was intended to reduce the trade imbalance between the two countries.
• Restore Confidence: The deal aimed to restore confidence in the global economy and financial markets, which had been rattled by the trade war.

What Happened During the 90 Days?

During the 90-day period, US and Chinese officials engaged in intense negotiations, holding several rounds of talks in both Washington and Beijing. These negotiations covered a wide range of issues, from intellectual property protection to market access. While progress was made in some areas, significant differences remained, particularly on issues such as enforcement mechanisms and structural reforms to China's economy. There were reports of disagreements over specific commitments, timelines, and verification procedures.

The negotiations were closely watched by businesses, investors, and policymakers around the world. The outcome of the talks had the potential to significantly impact the global economy and shape the future of US-China relations. Both sides expressed optimism at times, but there were also moments of uncertainty and concern that a deal might not be possible within the 90-day timeframe.

The Outcome: Did It Work?

The initial 90-day deadline passed without a comprehensive trade agreement being reached. However, both sides agreed to extend the negotiations, indicating that progress was being made and that a deal was still possible. Talks continued for several more months, but ultimately, a comprehensive agreement proved elusive. The US eventually increased tariffs on Chinese goods, and China retaliated, effectively ending the 90-day truce. It's fair to say that the 90-day deal, while providing a temporary respite, ultimately fell short of its initial goals. Despite the intensive negotiations, the fundamental differences between the two countries proved too difficult to overcome in the given timeframe.

What Were the Key Sticking Points?

Several key sticking points prevented the two sides from reaching a comprehensive agreement. These included:

• Enforcement: The US wanted strong enforcement mechanisms to ensure that China would comply with any commitments made in a trade agreement. China was reluctant to accept such mechanisms, viewing them as an infringement on its sovereignty.
• Structural Reforms: The US pressed China to undertake structural reforms to its economy, such as reducing subsidies to state-owned enterprises and opening up its markets to foreign competition. China was hesitant to make such sweeping changes.
• Intellectual Property Protection: While both sides agreed on the importance of intellectual property protection, they disagreed on the specific measures needed to address the issue. The US wanted stronger laws and enforcement mechanisms to prevent intellectual property theft.
• Tariffs: The US wanted to maintain some tariffs on Chinese goods even after a trade agreement was reached, as a way to ensure China's compliance. China wanted the tariffs to be removed.

The Broader Implications

The US-China trade war and the 90-day deal had significant implications for the global economy. The tariffs imposed by both countries disrupted supply chains, increased costs for businesses and consumers, and created uncertainty in the global markets. The trade war also strained relations between the two countries, leading to increased geopolitical tensions. The failure of the 90-day deal highlighted the deep-seated differences between the US and China and the challenges of resolving their trade disputes. It also underscored the importance of addressing these issues in a way that promotes fair trade, protects intellectual property, and fosters a level playing field for businesses in both countries. Even though the 90-day deal didn't lead to a lasting resolution, the lessons learned from this experience can inform future efforts to manage trade relations between the US and China.

Where Do Things Stand Now?

Since the 90-day deal, the US and China have continued to engage in trade negotiations, with varying degrees of success. While there have been periods of relative calm, tensions have also flared up at times. The trade relationship between the two countries remains complex and multifaceted, encompassing not only trade but also issues such as technology, security, and human rights.

As of today, some tariffs remain in place, and the US and China continue to grapple with their trade disputes. The future of the US-China trade relationship is uncertain, but it is clear that it will continue to be a major factor shaping the global economy and geopolitical landscape for years to come. The US-China trade war is an ongoing saga, and the 90-day deal is just one chapter in this complex and evolving story. Understanding the context, goals, and outcome of the 90-day deal provides valuable insights into the challenges and opportunities of managing trade relations between the world's two largest economies.