Executive Summary
- The US Trade Representative (USTR) launched an investigation into China’s compliance with the 2020 Phase One Trade Agreement.
- The investigation aims to increase leverage for President Trump ahead of his planned meeting with Chinese President Xi Jinping next week.
- China has responded with retaliatory measures, including tightening the flow of rare earth minerals and ceasing purchases of US soybeans and sorghum.
The Story So Far
- The US Trade Representative’s investigation into China’s compliance with the 2020 Phase One Trade Agreement is a direct consequence of ongoing, escalating trade tensions between the two nations, characterized by retaliatory measures such as tariffs and restrictions on agricultural and strategic goods. This inquiry is strategically timed to increase US leverage ahead of a crucial upcoming meeting between President Donald Trump and Chinese President Xi Jinping, where the future of their trade relationship will be a central topic.
Why This Matters
- The USTR’s investigation into China’s compliance with the Phase One trade agreement significantly escalates US-China trade tensions, creating additional leverage for President Trump ahead of his upcoming meeting with President Xi Jinping. This inquiry could lead to new tariffs, potentially impacting the global economy and further straining a relationship already marked by retaliatory measures, such as China’s halt on US agricultural purchases.
Who Thinks What?
- The US Trade Representative (USTR) initiated an investigation into China’s compliance with the 2020 Phase One Trade Agreement, aiming to hold China accountable for its commitments, protect American interests, and establish a more reciprocal trade relationship.
- China has responded to the escalating trade dispute with retaliatory measures, including plans to tighten the flow of strategic rare earth minerals and technologies, and ceasing purchases of US soybeans and sorghum.
The US Trade Representative (USTR) announced an investigation on Friday into China’s compliance with the 2020 Phase One Trade Agreement, a move that increases leverage ahead of a planned meeting between President Donald Trump and Chinese President Xi Jinping next week. This inquiry could pave the way for new tariffs, reflecting ongoing tensions in the US-China trade relationship.
Investigation Details
USTR Jamieson Greer stated that the investigation underscores the Trump administration’s resolve to hold China accountable for its commitments under the Phase One agreement. The agency aims to protect American farmers, ranchers, workers, and innovators, and to establish a more reciprocal trade relationship with China.
The USTR plans to consider whether China has fully implemented its commitments, what “burden or restriction” China’s actions have imposed on US companies, and what actions, if any, should be taken in response.
Diplomatic Context
This investigation comes as President Trump and President Xi are scheduled to meet next Thursday on the sidelines of the Asia-Pacific Economic Cooperation (APEC) meeting in South Korea. The world is closely watching this high-stakes encounter, as both nations continue to engage in threats that, if carried through, could significantly impact the global economy.
China’s Countermeasures
In recent weeks, Beijing has also taken its own retaliatory measures amid the escalating trade dispute. China announced plans to tighten the flow of strategic rare earth minerals and technologies, which are critical for the production of high-tech products ranging from microwave ovens to jet fighters.
Additionally, China has ceased purchases of US soybeans and sorghum, actions that have significantly impacted American farmers. These farmers represent an important part of President Trump’s electoral base.
Outlook
The USTR’s investigation marks a significant escalation in the trade dispute, adding further pressure on China as the two leaders prepare for their crucial meeting. With both sides engaging in tit-for-tat actions, the global economy remains attentive to the outcome of these heightened tensions and the upcoming diplomatic engagement.
