The U.S.-China Phase One Trade Agreement: Implications for U.S. Forestry

On January 15, 2020, the U.S. and China signed a “Phase One” trade deal to address desired structural reforms and other changes to the Chinese economy affecting international trade and foreign investment. The U.S.-China Phase One Trade Agreement, which is the first agreement in what is expected to be a series of agreements, focuses on reforms in the Chinese economy in the areas of intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange. The agreement also includes commitments by China to purchase additional U.S. goods over the next two years, including significant purchases of U.S. agricultural, food, fish and forest products (USTR, 2020a). Although the U.S. has agreed not to impose additional tariffs on imports from China, and China has agreed to reduce or eliminate certain tariffs imposed in retaliation, the Phase One Agreement does not specifically address the escalating tariffs between the two countries due to the ongoing trade dispute that started in 2018. However, the agreement signifies a decrease in tensions and a possible path to tariff reductions and eliminations in the future. This is particularly important for U.S. forest product exports, which suffered significant losses in 2018 and 2019 from Chinese retaliatory tariffs. In this report, we provide the context and overview of the U.S.-China Phase One Trade Agreement and implications for U.S. forest product exports. Forest products are a major agricultural and agriculture-related export for the U.S. However, the negative impact of the trade dispute on the sector has received little attention compared to other agricultural commodities such as soybeans and cotton. Over the last decade, the sector has become increasingly reliant on China for sales and suffered considerable losses from the retaliatory tariffs that China imposed (Ward, 2019; Pryor, 2019). The U.S.-China Phase One Trade Agreement sets the stage for a decrease in tensions between the two countries and the eventual removal of Chinese tariffs on U.S. products. This could result in considerable gains for the U.S. forest product sector moving forward.