Ahead of a meeting between Donald Trump and Xi Jinping, the US Trade Representative’s office is preparing to open an investigation into China’s compliance with a US-China trade deal signed in 2020 — the deal failed spectacularly and lapsed in 2021.
Ahead of a meeting between Donald Trump and Xi Jinping, the US Office of the Trade Representative is preparing to open an investigation into China’s compliance with a US-China trade deal signed in 2020, according to The New York Times.
In 2020, Trump signed the ‘Phase One’ trade deal with China. It required China to buy an additional $200 billion worth of American goods and services, including natural gas, soyabeans, and aeroplanes, above 2017 baseline levels. The deal is considered to be one of the biggest failures of Trump’s first terms.
The Office of the Trade Representative could start the process to open the investigation as early as Friday, according to The Times.
Ahead of the Trump-Xi meeting, an investigation into the 2020 trade deal could raise tensions. But Trump may also be wanting to use the probe as a leverage.
The investigation would be filed by the Office of the Trade Representative under Section 301 of the Trade Act of 1974, which allows the administration to investigate whether the trade practices of other countries are harming the United States, according to The Times.
Usually, such investigations are the first stage to impose tariffs on a country. In case ongoing trade talks do not go well, Trump could use the outcome of the investigation as a pretext to ramp up tariffs on China.
Trump and Xi are scheduled to meet on October 30 in South Korea on the sidelines of the Asia Pacific Economic Co-operation Summit (Apec). Ahead of the visit, Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer flew to Malaysia to hold talks with China’s lead negotiator, Vice Premier He Lifeng, on Friday. Those talks are expected to set the stage for the Trump-Xi meeting.
Ahead of their meeting with He, Greer told CNBC on Wednesday that he and Bessent would “to try to see if there’s room to move forward on some of these really difficult issues that have come up due to some new Chinese measures on rare earths”. He dubbed those measures “incredibly aggressive” and “totally disproportional” to any US action taken so far.
How US-China trade deal of 2020 failed
The US-China Phase One deal was a spectacular failure by all accounts.
In a report to Congress in 2023, then-US Trade Representative Katherine Tai said that China has “fallen far short of implementing its commitments to purchase US
goods and services in 2020 and 2021” under the deal.
The reality is that this Agreement did not meaningfully address the more fundamental concerns that the United States has with China’s state-led, non-market policies and practices and their harmful impact on the US economy and US workers and businesses,” the report stated.
An analysis by the Peterson Institute of International Economics (PIIE) found that China did not buy a single dollar-worth additional goods or services that it had committed to buy under the deal.
“In the end, China bought only 58 per cent of the US exports it had committed to purchase under the agreement, not even enough to reach its import levels from before the trade war. Put differently, China bought none of the additional $200 billion of exports Trump’s deal had promised,” Chad P Bown, the Reginald Jones Senior Fellow at PIIE, noted in the analysis.
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