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Trump's China Trade Deal Helps with Future Tariffs but Comes at a Big Cost

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President Trump today signed an initial trade deal with China, defusing a spate of recent trade disputes with one of the world’s largest economies. CEI senior fellow Ryan Young counts a few short term gains but more long-term problems:

“The newly-signed Phase One of a trade deal with China will diminish damage caused by any further tariffs, but it comes at a cost. American consumers and businesses will still pay tariffs on 40 percent of Chinese imports that were mostly tariff-free just a few years ago. Consumers are worse off over all, and those still-new tariffs now risk becoming normalized because neither Trump nor Congress seemed inclined to roll them back, anyway, and now they're also part of an international agreement.

The agreement’s embrace of managed trade rather than free trade is its biggest shortcoming. China’s biggest obstacle to sustained growth is government micro-managing the economy. President Trump is copying those mistakes in Phase One’s provisions, not leading by example.

Phase One lacks both transparency and accountability. It imposes purchasing requirements for agricultural goods that not only override private purchasing decisions, but are not being made public. The purchasing quotas will be easy to evade and go against America’s open government principles. 

Provisions for specific reforms, such as forced technology transfers, will fail because they do not require specific actions by Beijing. As a result, none will likely be taken. 

The benefits of a cease-fire on unpredictable tariff increases are an important accomplishment, but this agreement President Trump entered into with short term political gains in mind may have significant long-term economic costs for the American economy and consumers.”