US-China trade deal may resemble phase 1 agreement from Trump’s first term: ex-official

The US-China deal under negotiation is likely to bear similarities to the phase one trade agreement from Donald Trump's first term, acc...

The US-China deal under negotiation is likely to bear similarities to the phase one trade agreement from Donald Trump's first term, according to a former senior official in that administration - offering clues to what the highly anticipated pact may look like just weeks before a trade truce between the two rival economies is set to expire.

The agreement is "very likely to resemble, in its broad contours, the phase one trade deal negotiated between 2017 and 2020, and at the heart of that was a substantial purchase of US agricultural and industrial goods", said Stephen Biegun, deputy secretary of state under Donald Trump from 2019 to 2021, at the Aspen Security Forum on Wednesday.

Under the deal struck in 2020, China agreed to buy an additional US$200 billion worth of American goods and services over two years compared to 2017 levels. Much of that deal did not materialise, partly due to the economic devastation caused by the Covid-19 pandemic that began soon after the agreement was signed.

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Trump officials have, to varying degrees, signalled a desire to revive the deal. On the first day of his second term, the US president signed an executive order directing a review of China's compliance with the agreement.

US Treasury Secretary Scott Bessent, who is leading the current trade negotiations, has cited Beijing's failure to meet its commitments as something to "take into account" - and called the phase one deal a "road map" for current talks.

Explaining why he expects a similar framework this time, Biegun said Chinese officials have recognised that they have to "pay a certain price" to create "at least some temporary balance in the US-China trade relationship".

"The (US) president uses the trade balance as his singular yardstick to measure the economic fairness in bilateral relations with any country around the world, including allies," Biegun explained. "And it's no different in the case of China."

He added that the final tariff rate on Chinese goods under any new deal would likely exceed the roughly 10 per cent that Trump has proposed for many other countries.

Biegun also warned that it was "much less likely" the new agreement would directly address long-standing US complaints such as China's intellectual property theft and industrial overcapacity. But he said Washington's negotiations with other trade partners could force Beijing to push through reforms.

"In these negotiations the Trump administration is undertaking with trade partners around the world, there is now a boilerplate provision of higher tariffs on transshipped Chinese goods," he explained. "So the Chinese are not going to be able to use back doors to get into the US economy."

"The president wants a big, splashy purchase of several hundred billion dollars of American goods, but maybe, in the end, it also proves to be the right way to reform the Chinese economy."

Beijing and Washington are in the final stretch of a 90-day trade truce, with an August 12 deadline to reach a more durable deal. Earlier this year, the Trump administration raised tariffs on Chinese goods to as high as 145 per cent, prompting Beijing to respond with steep levies of its own - before both countries de-escalated after a meeting in Geneva in May.

Since then, talks have progressed. In a second round of talks in London in June, both sides reached an understanding to ease export controls on semiconductors and rare earth minerals.

On Tuesday, Bessent told Bloomberg TV the two countries were "in a very good place" ahead of an expected meeting in the coming weeks and suggested the August deadline could be flexible.

Earlier this week, chipmaker Nvidia said the US government had assured it that licences for sales of its advanced H20 AI chips to Chinese firms would be granted - a development confirmed by Bessent in his Bloomberg interview.

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This article originally appeared on the South China Morning Post (www.scmp.com), the leading news media reporting on China and Asia.

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