President Donald Trump and Chinese Vice Premier Liu He signed phase one of a hard-fought trade deal Wednesday, capping a bitter 18-month battle between the world's two largest economies that has roiled markets and slowed economic growth worldwide.
"President Trump has shown us that tough negotiation as the means to the end works," said Larry Kudlow, the White House senior economic adviser. "This is huge. Nothing like this in history has ever happened before."
The $200 billion trade deal includes "an average" of $40 billion a year for the next two years in agricultural purchase targets from the Chinese; a pledge to purchase $77.8 billion more in U.S. manufactured goods, such as cars, aircraft and farm machinery; $52.4 billion in U.S. oil and gas purchases; $37.9 billion in financial and other services; and increased protections for U.S. intellectual property.
Wall Street cheered the long-awaited deal. The Dow Jones Industrial Average rose by almost 200 points at midday Wednesday to breach the 29,000 mark again, and all three major indices hit record highs.
The sparring has weighed heavily on markets for the last 18 months as companies and traders parsed the bluster from both sides. While Trump dismissed the standoff in May as nothing but "a little squabble," the International Monetary Fund predicted the trade war would damage global growth by 0.1 percentage points this year, and $1 trillion has already been wiped off global markets.
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Not everyone was won over by the phase one agreement, with some economists saying that after almost two years of posturing, the actual commitments eked out in the deal do not go far enough.
"It doesn't include anything that is related to the entire issues surrounding Huawei, 5G, export controls or a host of new technologies," said Jacob Kirkegaard, a senior fellow at the Peterson Institute for International Economics.
"There is nothing here concerning Chinese subsidies ... and that is the big omission," Kirkegaard said in an interview. "If you're worried about China as a long-term tech competitor, then clearly the logic of that argument rests with the fact that the Chinese are 'rigging the system' through state-owned subsidies."
While the U.S. delegation was able to extract certain commitments from China, such as access to its financial sector and criminal penalties for intellectual property theft, the phase one deal does not fundamentally alter China's economic business model as Trump sought when he slapped tariffs on Beijing in July 2018.
The deal does not, for example, address or change China's state subsidy of the agricultural sector — leaving U.S. farmers to wonder what they have gained after months of punishing tariffs that destroyed their margins and contributed to bankruptcies nationwide.
In addition, thornier issues such as the enforcement of forced technology transfer — wherein China withholds access to its markets to companies who do not pass along their private technology — have been relegated to the second phase of the trade deal, which is not likely to be resolved until after the U.S. presidential election.
Treasury Secretary Steven Mnuchin even intimated that phase two could include phases "2A, 2B, 2C," telling CNBC on Wednesday, "We'll see."