The U.S. and China are said to be close to signing a phase-one trade deal in early January  a move that will see Washington reduce tariffs on Chinese goods, or at least temporarily calm fears of an escalating trade war between the world's two largest economies.

Analysts noted that economic challenges at home, including liquidity jitters, rising unemployment and the idea of decoupling the two economies, are reasons why the Chinese government appears to have conceded more than its U.S. counterpart.  
 
However, the mini deal, once signed, won't do much to stop the U.S.-China tech war, which is at the core of their trade frictions, they add.

  "Where the real tension or where the real drama between the United States and China is in the tech sector. And the tech sector is back at where nothing has happened whether its Huawei, ZTE, intellectual property [IP], anything like that," said New York-based Anne Stevenson-Yang, co-founder and research director of J Capital Research.
 
Tech war ahead?
 
"The real battle ground of this trade relationship has not been entered," she added.
 
While U.S. President Donald Trump has been rhetorically demonizing China, he hasn't come on strong in addressing the tech-sector issues, which may end up driving up U.S.-bound Chinese tech imports to worsen trade imbalances, the analyst noted.
 
Stevenson-Yang said that she isn't optimistic that the mini deal will ease Washington's annual trade deficit of $300 billion with Beijing in lieu of a mechanism to enforce China's vaguely-committed purchases of American goods or structural change of its economy.
 
"And what it signals is the U.S. is much more desperate to the deal than China is and that leverage only increases as the years go on because the leverage is all about the elections" for Trump, she argued.
 
On December 13, U.S. officials announced that China had agreed to increase "purchases of manufactured goods, agricultural goods, energy products and services by at least $200 billion over the course of the next two years."

 Closing phase-one deal
 
And the deal will cover structural change in China, which will be "totally enforceable," according to U.S. Trade Representative Robert Lighthizer.
 
Chinese Vice Commerce Minister Wang Shouwen also confirmed that the text of the agreement includes nine chapters on protection of intellectual property rights, tech transfer, access to the financial service market, exchange rates, transparency and dispute settlements.
 
In spite of being a developing country with excess capacity, China has high demand for imports of animal feed, energy and high-end tech products, which is why it is motivated to live up to its U.S. purchase commitment, said Liao Qun, chief economist at China CITIC Bank International Ltd.
 
But the United States should allow reasonable room for China to gauge market conditions and adjust its purchases in years to come, he added.
 
At face value, the mini deal will represent a temporary cease-fire in the U.S.-China trade war, but it'll never be enough to sustain a long-term truce, the economist said.
 
Cease-fire in sight?
 
"The U.S. and China will continue to fight their tech war, financial and [even exchange rate] war. A cease-fire to the trade war may be declared now, after which, both parties will still have to continue negotiating concessions. China will have to concede more given the relatively large size of their trade imbalances. In principle, China has long been agreeable to narrow the [U.S.] trade deficit," he said.  

Darson Chiu, a research fellow at the Taiwan Institute of Economic Research, agreed that the U.S.-China tech war won't easily go away as it matters which country will dominate the global high-tech development in the next decade to come.
 
And in the short run, there's still a possibility that the phase-one deal may not end well as Washington and Beijing do not see eye-to-eye on China's committed purchases and structural change, he said.
 
For example, starting January, China will lower tariffs on more than 850 products ranging from frozen pork, avocados to some types of semiconductors, as Beijing looks to fill domestic shortages and boost imports amid a slowing economy and its trade war with the United States.
 
"Judging from China's list of tariff cuts on more than 800 products, what it needs may not match what the U.S. will ask it to buy. It looks that there exists a mismatch between what China demands and what the U.S. can supply. So, there's a huge possibility that future trade conflicts may continue to haunt both countries," Chiu said.
 
Chiu said that China agrees to a phase-one deal with the United States because it doesn't want external pressures to weigh on its incumbent tackling of domestic debt issues and the financial sector's default risks as well as its reform on state-run enterprises.
 
Deep-water issues
 
But the United States shouldn't keep its hopes high on China being aggressive in addressing its unfair trade practices, intellectual property rights infringements, tech theft, export subsidies or a weaker currency to gain pricing advantages — what Chiu called "deep-water areas" Washington will next focus on to wrangle with Beijing in order to reach a broader trade agreement.
 
China's promises to enforce structural change have been nothing new, which will boil down to how they are carried out effectively, Chiu said.
 
In particular, China will never easily back down from its firm support for state-run enterprises, which it believes have helped the Chinese economy cope with many economic downturns.
 
The Trump administration has said its tariffs will largely remain  25% on $250 billion-worth of Chinese imports  and be used as bargaining chips for future negotiations with China on a phase-two deal.

Source: VOA News