China has agreed to purchase $200 billion worth of products from the US as part of a "phase one" trade deal between the two countries.
Under the phase one trade deal signed on Wednesday, China will buy an additional $200 billion worth of US goods and services over the next two years. In exchange, the US has agreed to bring down the tariffs on $120 billion in Chinese products from 15% to 7.5%.
This increase in purchases is comparable to the more than $185 billion worth of US products imported by China in 2017, prior to the trade war. The new deal will dramatically increase US exports over the next two years.
If the deal will be followed, total exports to China would increase to more than $260 billion in 2020 and around $310 billion in 2021. Analysts at UBS pointed out:Â "We think it is highly challenging for China to import $200 billion more goods and services from the US over the next two years without reducing imports from elsewhere."
A significant portion of the new purchases will be from agricultural goods. Under the deal, China will purchase an additional $12.5 billion of those goods in 2020 and $19.5 billion the following year, as compared to 2017.
Among these agricultural products were soybeans, pork, cotton and wheat. Both soybeans and pork were among thousands of US goods hit by Chinese tariffs in July 2018, in retaliation to the Trump administration's taxes on $34 billion of Chinese goods.
The trade deal also includes increased protection to US companies that have long complained about thefts of their intellectual property and trade secrets, as well as looser requirements for banks planning to operate in China.
The deal is expected to provide ease to Chinese manufacturers, who have suffered from tariffs that made their products more expensive. It also addressed some of the uncertainty companies have been having when deciding whether to invest in China.
