China to propose restoration of 2020 ‘Phase 1’ trade deal with the US: Report

China's initial proposal to address tariffs and technology restrictions by the US President Donald Trump's administration will reportedly focus on restoring the ‘Phase 1’ trade deal signed in 2020 during his first term in the White House.

Recently, the Trump administration had imposed 25% tariffs on imports from Mexico and several Canadian goods, as well as 10% on goods from China, due to its failure to curb chemicals used to produce fentanyl, a deadly opioid.

Other elements of Beijing's plan include an offer to make additional investments in the US in sectors such as electric vehicle batteries. This marks a renewed pledge by Beijing not to devalue the yuan to gain a competitive advantage, alongside a commitment to reduce exports of fentanyl precursors, sources informed The Wall Street Journal.


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Phase 1 trade deal

In 2020, Trump signed the Phase 1 trade deal, which effectively ended the nearly two-year tariff war at that time. As per the deal, China was required to increase its purchases of US exports by $200 billion over two years. But the country was unable to meet these targets due to the COVID-19 pandemic, according to Reuters.

In January this year, Trump directed the United States Trade Representative (USTR) to assess Beijing's performance under the trade deal.

Trump had previously called Phase 1 the “greatest deal” ever made, though trade experts deemed it unrealistic from the outset.

After failing to deliver on its pledges under the deal, China is now preparing to engage with the Trump administration on areas where it can secure more from the US, according to people familiar with the matter.

‘Commercial matter’

According to a report in The Wall Street Journal, China is also planning to treat TikTok primarily as a “commercial matter,” meaning that the government intends to remain uninvolved, allowing investors in its Chinese parent company, ByteDance, to negotiate a deal with interested bidders in the US.

This comes after Trump previously stated that he wants US and Chinese interests to share 50-50 control of the app.

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China’s response to tariffs

China’s Ministry of Commerce initially stated that it would challenge the tariffs imposed by the Trump administration at the World Trade Organization (WTO). However, the international body's dispute resolution mechanism has remained disabled since Trump’s first term.

The Chinese Ministry has also called for “frank dialogue” between the two sides. The Chinese Embassy in Washington has also urged the US to “correct its wrongdoings.”

FAQs

1. What was Canada's response to tariffs by the Trump administration?
Canada, a long-time ally of the US, announced retaliatory tariffs of 25% on C$155 billion ($105.17 billion) worth of US goods.

2. Has the Trump administration put the Mexico tariffs on hold?
Mexican President Claudia Sheinbaum stated that the country had reached a series of agreements with Trump's administration, which has resulted in the tariffs being put on hold for one month. The US President also confirmed this on Truth Social.