China Phase 1 Trade Deal Raises Worries About Free Trade While the new deal with China lowers some trade barriers, it leaves many tariffs in place. And it dictates that China buy more from the U.S., but that has other trading partners worried.

Does The China Trade Deal Move The World Away From Free Trade?

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The trade agreement known as phase one that President Trump signed with China this week is unlike any other free trade deal we've seen before. The president says that's the point.


PRESIDENT DONALD TRUMP: We are righting the wrongs of the past and delivering a future of economic justice and security for American workers, farmers and families.

SIMON: The agreement does lower some trade barriers. But rather than simply encouraging free and open competition, the deal requires China to buy hundreds of billions of dollars' worth of goods and services from the United States.

NPR's Scott Horsley joins us to take a closer look at this agreement. Scott, thanks so much for being with us.

SCOTT HORSLEY, BYLINE: Good morning, Scott.

SIMON: What does make this deal so different than other agreements previous presidents have signed?

HORSLEY: Most trade deals in the past have been about knocking down barriers that other countries have put up around their markets so that American firms have a better chance of doing business there. And this deal does do some of that. It does try to pry open doors for U.S. cattle ranchers and dairy farmers to sell more to China, for example.

But more than just leveling the playing field, this deal actually requires China to buy an extra $200 billion worth of stuff from the U.S. over the next couple of years. Trump is hailing that as an "America First"-style win, but it's a sharp break from what the U.S. has advocated in the past. One critic likens it to the kind of heavy-handed managed trade we saw in the old Soviet Union.

Darci Vetter was an agricultural negotiator during the Obama administration. She says it's not what farmers want either.

DARCI VETTER: What U.S. farmers and ranchers told me they wanted was really the opportunity to form long-term relationships with partners in China and to do so on a market basis.

HORSLEY: Vetter says farmers don't just want to boost sales during an election year or the year after. They're making long-term investments and decisions, so they want to build relationships that will last.

SIMON: Scott, is China really going to buy an extra $200 billion worth of stuff from the United States?

HORSLEY: A lot of observers are skeptical. That would mean boosting exports by more than 50%. During the signing ceremony at the White House this week, China's vice premier suggested his country will only buy as much as it needs from the United States. Liu He is speaking here through an interpreter.


LIU HE: (Through interpreter) As the living standards of the Chinese people rises, we will import fine-quality agricultural products from countries across the world, as the two sides have agreed, based on the market demand in China.

HORSLEY: So you've got this odd situation where China's talking about market demand, and the U.S. is imposing a kind of centrally planned shopping list.

SIMON: And I gather, Scott, some other countries have threatened to raise complaints about this deal with the World Trade Organization. Why are they unhappy?

HORSLEY: One way China could meet its purchase targets is by buying more from the U.S. and less from other countries. And not surprisingly, other countries don't like that. But Trade Representative Robert Lighthizer insists this deal doesn't run afoul of WTO rules.

Like the president, Lighthizer is not overly concerned about getting buy-in from the international community. He told reporters this week, if you're Switzerland, you're better off working through a group and trying to get a coalition. If you're the United States, you don't need to.

SIMON: Trade deals in the past have often focused on trying to bring down tariffs. This agreement leaves some big tariffs in place. What's the logic of that?

HORSLEY: Yeah. Trump says he wants those tariffs as a bargaining chip, both to prevent backsliding on this phase one agreement and to encourage negotiation of a second phase. The average U.S. tariff rate on Chinese imports now is more than 19%. That's compared to just 3% before this trade war started. And it's costly for American business owners, like Angela Carr of Pittsburgh. Her Turbie Twist company imports hair towels from China.

ANGELA CARR: It's kind of a hidden tax. Sometimes people, because it's called a tariff, I think, are led to believe that perhaps China is paying for this when, in fact, the cost is going to be carried by either the consumers, the retailers or the small businesses, or all three.

HORSLEY: Carr, who voted for Donald Trump back in 2016, says she's not too crazy about his trade policies. But for now, it looks like those tariffs are here to stay.

SIMON: NPR's Scott Horsley, thanks so much.

HORSLEY: You're welcome.

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