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Commerce Secretary: 'Phase 1' China Trade Deal Could Come This Month

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Commerce Secretary: 'Phase 1' China Trade Deal Could Come This Month

The iShares FTSE/Xinhua China 25 Index (NYSE: FXI) popped 1.5% and the SPDR S&P 500 ETF Trust (NYSE: SPY) traded up marginally Monday on reports of progress in U.S. trade relations.

At the invitation of President Donald Trump, China’s Xi Jinping may soon cross the Pacific to sign phase one of a deal. No plans have been finalized, but negotiators hinted at a potential meeting this November to finalize the first in a series of agreements.

What Happened

Before a Monday Bangkok meeting with Chinese Premier Li Keqiang, Commerce Secretary Wilbur Ross said the U.S. was “very far along” with an initial trade deal, and U.S. negotiators were in the process of “making sure that each side has a very correct and clear, detailed understanding of what each side has agreed to,” according to Bloomberg

Ross predicted the phase-one agreement may conclude this month.

“We’re in good shape, we’re making good progress, and there’s no natural reason why it couldn’t be,” Ross said. “But whether it will slip a little bit, who knows. It’s always possible.”

So far, the deal would include an increase in Chinese imports of U.S. agricultural products, stabilization of the renminbi and American access to China’s financial services markets.

Beijing has demanded the U.S. lift its punitive tariffs on Chinese goods. The U.S. has not clarified its intent to abandon the wave of tariffs planned for December.

“We’re relatively close to an agreement,” U.S. National Security Adviser Robert O’Brien said in Bangkok, Bloomberg reported. “I’m cautiously optimistic about it.”

Why It’s Important

U.S. exporters, importers and their global supply chains have suffered from the ongoing U.S.-China trade war. Many have reported or forecasted pressure on the bottom-line. A deal is the only hope of lifting tariffs and other trade restrictions.

Ross said progress beyond phase one would require China to solidify U.S. demands through legislation and development of enforcement mechanisms.

What’s Next

Officials have cited Iowa, Alaska, Hawaii and various Chinese cities as potential sites to seal the deal. Trump has said the agreement will be completed in the U.S.

Ross added that the U.S. will issue licenses for components companies to sell to Huawei Technologies “very shortly.”

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