Mnuchin says more tariffs will be rolled back in phase two of trade deal

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Treasury Secretary Steve Mnuchin speaks about sanctions against Turkey at a news briefing at the White House in Washington, October 11, 2019.

Yuri Gripas | Reuters

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Treasury Secretary Steven Mnuchin said Wednesday that a future “Phase Two” trade deal with China would ease U.S. tariffs on goods purchased from China even if the second round of negotiations is itself parsed into multiple rounds.

“Just as in this deal there were certain rollbacks, in ‘Phase Two’ there will be additional rollbacks,” he told CNBC. “It’s really just a question of — and we’ve said before — Phase Two may be 2A, 2B, 2C. We’ll see.”

“The first step is really focusing on enforcement, but this gives China a big incentive to get back to the table and agree to the additional issues that are still unresolved,” he added.

Mnuchin joined CNBC hours before top American and Chinese negotiators are expected to signed a key “Phase One” deal that is expected to include an agreement by China to purchase some $200 billion of U.S. goods over two years. The components of those purchases are about $80 billion in manufactured goods, $53 billion in energy, $32 billion in agriculture and $35 billion in services.

But it’s also expected to lower structural barriers for American companies hoping to do business in China. Specifically, the pact is said to address concerns of U.S. executives who’ve long complained that they are routinely pressured, if not outright forced, to share key technologies in exchange for market access.

Though China denies it forces foreign companies to surrender proprietary technologies, American companies say they’re often compelled to share business secrets through backdoor tactics like joint ventures. Such practices, combined with Beijing’s practice of subsidizing domestic business, can build competitive rivals to Americans companies seemingly overnight.

“It’s not a question of admission, it a question of what they’re going to do,” Mnuchin added. “And China has agreed to put together very significant laws to change rules and regulations and have made very strong commitments to our companies that there will not be forced technology going forward.”

“And I think that’s a very big win for our technology companies, for our businesses and for American workers,” he said.

Those concerns helped drive President Donald Trump to start a tit-for-tat trade war with China nearly two years ago, when he first announced tariffs on imported steel and aluminum.

The feud between the globe’s two largest economies has resulted in each side slapping levies on billions of dollars’ worth of imports and forced major American corporations to shift supply chains throughout Asia. U.S. farmers, in particular, have taken a heavy hit from the trade dispute after China began buying soybeans and other agricultural commodities from Brazil and other South American countries.

— CNBC’s Eunice Yoon contributed reporting.

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