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Trump says Phase 2 China deal unlikelyTrump says Phase 2 China deal unlikely

Phase One trade deal was signed Jan. 15, Trump said work on Phase 2 could start right away.


July 10, 2020

3 Min Read
President Donald Trump talks
Chip Somodevilla/GettyImages

By Jennifer Jacobs

President Donald Trump said a phase two trade deal with China isn’t under consideration, saying the relationship between Washington and Beijing has deteriorated too much.

“I don’t think about that,” Trump said Friday when asked about the possibility of a second round of trade agreements with China. “The relationship with China has been severely damaged.”

Trump’s comments -- made to reporters aboard Air Force One on his way to Florida for a fundraiser and a visit to a military base -- reflect the steady breakdown of ties between the two nations over the coronavirus pandemic, trade and the competition for military supremacy in the South China Sea.

When the two nations agreed to the first phase trade deal in January, Trump said that talks on a second phase could start right away but might not finish until after the Nov. 3 general election. Since then, the two countries have been wrangling over the implementation of the initial agreement, and Phase 2 was contingent on the first rounds going well.

U.S. stocks held onto most of their advance after the news, a signal that investors may have discounted the prospects for further progress on U.S.-China trade any time soon.

In the first phase of the trade deal signed Jan. 15 in Washington, China committed to revamp its intellectual-property protections and to buy some $200 billion in additional U.S. exports over two years, in return for the U.S. offering some relief on tariffs. So far, China has stuck to its plan to accelerate imports of American farm goods after talks in Hawaii.

Related:What's new, what's unclear in phase one trade deal

Key issues in the trade relationship remain, including dealing with the web of industrial subsidies that have helped give Chinese companies a leg up in growing into fierce global competitors in recent decades.

The U.S. has ramped up pressure on China across many fronts in recent months, accusing it of covering up the origins of the Covid-19 pandemic and reneging on promises to guarantee political autonomy to the former British colony of Hong Kong. The election campaigns for Trump and Democratic presidential nominee Joe Biden have sought to taint each other as weak in confronting Beijing’s leaders.

The administration plans to make an announcement next week related to China’s decision to conduct military exercises in the contested waters around the Paracel Islands, a move the U.S. has deemed “unlawful,” according to people familiar with the matter.

On Thursday, the U.S. sanctioned a top member of China’s ruling Communist Party and three other officials over human rights abuses against Muslim Uighurs in the western region of Xinjiang. Trump is also poised to sign legislation punishing Beijing for quelling dissent in Hong Kong as it took steps to limit the island’s autonomy.

Related:The Phase One China deal and cash corn basis

Some top advisers to Trump want the U.S. to undermine the Hong Kong dollar’s peg to the U.S. dollar as the administration considers options to punish China for recent moves.

--With assistance from Ana Monteiro.

To contact the reporter on this story:

Jennifer Jacobs in Washington at [email protected]

To contact the editors responsible for this story:

Alex Wayne at [email protected]

Joshua Gallu, Wendy Benjaminson

© 2020 Bloomberg L.P.

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