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What Phase 1 of Trump’s China trade deal includes — and what it doesn’t

After two years of escalating threats and tariffs, the U.S. and China have signed a trade deal. In what is known as Phase 1 of a larger agreement, Beijing pledged to increase purchases of U.S. goods, while U.S. tariffs remain on $360 billion of Chinese imports. Nick Schifrin reports and Judy Woodruff talks to Peter Navarro, director of the White House Office of Trade and Manufacturing Policy.

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  • Judy Woodruff:

    After more than two years of escalating threats, tariffs and trade wars, the U.S. and China signed a new trade deal today.

    As Nick Schifrin tells us, it is known as phase one of a potentially larger deal.

    But the administration critics and businesses all say it is crucial to make sure it is enforced and that the reality matches the rhetoric.

  • Nick Schifrin:

    Today, the world's two largest economies declared a partial truce.

  • President Donald Trump:

    Our efforts have yielded a transformative deal that will bring tremendous benefits to both countries. We have a great relationship with China.

  • Nick Schifrin:

    Standing next to China's top negotiator, President Trump predicted the deal would begin fundamental reforms to China's economy.

  • President Donald Trump:

    This is the biggest deal anybody has ever seen, and it can lead to being a deal that's unprecedented, because China has 1.5 billion people. And, ultimately, in phase two, we're going to be opening up China to all of your companies.

  • Nick Schifrin:

    Under the deal, China agrees to purchase $200 billion over the next two years of U.S. agriculture, energy, manufacturing, and financial services.

    And the administration says China promised to protect U.S. companies' intellectual property, stop forcing American companies to transfer technology to access Chinese markets, and lift financial service barriers.

    But China has pledged many of those reforms before, and has a history of failing to buy as much as it promises.

    Senate Minority Leader Chuck Schumer has supported the administration's China policy goals, but says this agreement failed to go far enough.

  • Sen. Chuck Schumer, D-N.Y.:

    The agreement doesn't address the Chinese government's massive subsidies to support domestic industries, devastating global markets, and eroding American competitiveness.

  • Nick Schifrin:

    For months, the Trump administration and China have targeted each other with tariffs that hurt the Chinese economy and U.S. farmers and raised some consumer prices.

    As part of the deal, the U.S. reduced some tariffs, but maintained most of the tariffs on hundreds of billions of dollars of goods already imposed.

    President Trump said those tariffs, and new enforcement language, would guarantee China won't break its promises.

  • President Donald Trump:

    We have full — again, the word, one of the strongest things we have, total and full enforceability. And you know what that means, total, full enforceability.

  • Nick Schifrin:

    Reaching a bigger agreement depends on how both countries follow through.

    President Trump said today he expects further negotiations to begin next month.

    For the "PBS NewsHour," I'm Nick Schifrin.

  • Judy Woodruff:

    Let's take a closer look now at some of what's been agreed to in this deal and the caveats and criticisms around it.

    Peter Navarro is one of the president's top advisers on all things trade. He is the director of the White House Office of Trade and Manufacturing Policy.

    Peter Navarro, welcome back to the "NewsHour."

  • Peter Navarro:

    Great to be with you.

  • Judy Woodruff:

    Thank you for being here.

    So, let me first ask you about what we just heard Nick Schifrin report. And that is, if most of the tariffs that the Trump administration has already imposed, what is it, hundreds of billions worth of Chinese…

  • Peter Navarro:

    Three hundred and seventy billion dollars.

  • Judy Woodruff:

    Three hundred and sixty, seventy billion.

  • Peter Navarro:

    Primarily — and this is important — this is important.

  • Judy Woodruff:

    If those — if…

  • Peter Navarro:

    Two hundred and fifty billion is the high-technology products that China has specifically targeted to dominate the economy in the future, and those are our technological crown jewels.

    Those tariffs are really essential to defending our entrepreneurs, our workers and our manufacturers and this country.

  • Judy Woodruff:

    Well, that's what I want to ask you about.

  • Peter Navarro:

    Sure.

  • Judy Woodruff:

    If those tariffs are staying in place, how does this deal help American businesses that depend on Chinese imports and the consumers who purchase those?

  • Peter Navarro:

    Well, the implicit assumption under your questions is somehow tariffs are bad.

    And this administration, I think what we have proven is that tariffs are really a good tool to defend our workers, our manufacturers, our innovators. They're a tool that the president has used in this case, for example, to bring China to the bargaining table, to complete what is an absolutely historic deal.

    And, by the way, the tariffs have had the effect, the beneficial effect, of reducing our trade deficit now with China for the last four months. That's a good thing, because what it means is, we're producing more here, rather than there. That's more jobs. That's higher wages.

    And it's good reason underlying why we have the best economy and labor market in the last five decades.

  • Judy Woodruff:

    I hear this argument, and this is a deal that does require China to buy, again, as we just heard, $200 billion in specific products over the next…

  • Peter Navarro:

    Over and above the 2017 benchmark.

  • Judy Woodruff:

    Over the next two years.

    But China, as we know, has made these promises before.

  • Peter Navarro:

    Yes, they have.

  • Judy Woodruff:

    They haven't lived up to it.

  • Peter Navarro:

    Yes.

  • Judy Woodruff:

    How do you know that this time is going to be any different?

  • Peter Navarro:

    As President Donald j. Trump said in that package, a full and enforceable deal, full and enforceable deal.

    Let's contrast this with the WTO, the World Trade Organization. When China joined the WTO, they broke every rule in the book. We would complain. It would take three years or more to get satisfaction, and, ultimately, a company would be out of business.

    This, 90 days, and complaint comes…

  • Judy Woodruff:

    Ninety days to what?

  • Peter Navarro:

    Ninety days from the point of where we complain or a company complains to the point of resolution.

    And here's the most important thing. This is why it's fully enforceable. We have the unilateral authority to judge whether the grievance has been settled.

    And if Ambassador Robert E. Lighthizer, the greatest USTR in history, decides that they didn't address that, then he has the ability to put in proportioned measures immediately.

    So this is — we can't lose here, because they either abide by the deal, like reformers like Liu He wants to do in China, or the other wing, the so-called mercantilist, hawkish wing of Chinese…

  • Judy Woodruff:

    These are Chinese leaders you're speaking about.

  • Peter Navarro:

    They don't — they don't abide by the agreement.

    But, in this case, unlike with the World Trade Organization, we have fully enforceable measures to take in defense of American workers.

  • Judy Woodruff:

    You're saying there's new teeth here.

    So — but let me bring up…

  • Peter Navarro:

    There's big teeth here. There's jaws here to go with them.

    (CROSSTALK)

  • Judy Woodruff:

    Let me bring up another criticism.

  • Peter Navarro:

    Sure.

  • Judy Woodruff:

    And, again, we heard some of this.

    A number of economists and Senate Minority Leader Chuck Schumer — and we heard some of this from him a moment ago — say there's nothing in this deal that addresses China's habit, policy of subsidizing their critical industries that compete with American firms.

    In fact, we heard Minority Leader Schumer say today he thinks China's President Xi is privately laughing at President Trump.

  • Peter Navarro:

    Yes.

  • Judy Woodruff:

    He said — quote — "They have taken the president to the cleaners."

  • Peter Navarro:

    So here's what's interesting, two things.

    One is, first of all, Chuck Schumer, when he started criticizing this deal, hadn't read it. And it wasn't released today until after the press conference. It's 86 pages. And I will bet you a lot of money he didn't read that deal before. So that was pure politics.

    Let me explain what this does. I have referred to China's seven deadly structural sins.

    So what we get in the first phase is, we get intellectual property theft addressed. We get forced technology transfer addressed. And we get currency manipulation addressed.

    And over and above that, we have got the purchases and financial market access. That's a big deal. That's a good deal for America. You're absolutely right, Judy. We do not get in this part of the deal the unfair subsidies. We don't get the state-owned enterprises that we have to deal with.

    We don't get — very important to me is the hacking of our computers by the Chinese government to steal our business trade secrets. And the worst thing is, they're killing Americans with fentanyl, OK?

    But — but we do have those tariffs in place. Those tariffs serve two things. They're the best defense against the Chinese in terms of this dumping. They're also…

  • Judy Woodruff:

    Tariffs that are still in place.

    (CROSSTALK)

  • Peter Navarro:

    Tariffs that are still in place.

    They're an insurance policy that the Chinese will continue to bargain in good faith. So, we think that the president has done a beautiful job on this.

    And, by the way, you have seen this for 15 years, how we lost all these jobs because President Obama, President Bush, President Clinton, they all laid down for the Chinese. President Trump is standing up.

  • Judy Woodruff:

    Well, we're watching and we will see how this turns out.

    But you just — you mentioned technology transfer, intellectual property theft.

  • Peter Navarro:

    Yes.

  • Judy Woodruff:

    There are lawyers who have been out there looking at this. They have been looking at the agreement. They say there are loopholes. There are exceptions.

    How do you know China is going to abide?

  • Peter Navarro:

    Let me just give you an example how this is going to work. Let's take the intellectual property theft, because this is something I have been working on leading into this agreement for a year now.

    What we're doing — counterfeits is a form of intellectual property theft. So, you go online or Amazon or Alibaba or something, you buy these fake goods that come in from China.

    What we are doing with Customs and Border Protection every month is, we're opening thousands and thousands of packages, benchmarking. And what we're finding is a counterfeit and contraband rate of 15 percent.

    It's extraordinarily high. So people are getting ripped off right and left. A lot of those products can harm you.

    So, in this case, we're going to know over the coming months. That rate has got to go way down, or they're violating the agreement. They're purchasing our foreign products or they're not. If they're not, they're violating the agreement.

    Their currency, which went up over 10 percent when we first started the trade agreement, that's got to come down. So it's very easy to measure some of these things. And if they violate the agreement, we have a fully enforceable mechanism to make sure that the Americans are protected.

  • Judy Woodruff:

    Do you think they will abide by this agreement? Or do you fully expect that they will try to get around it?

  • Peter Navarro:

    I like what Ambassador Lighthizer has had to say, and I think it's exactly right.

    You have the reformers with Liu He in China. They desperately want to abide by this agreement, because they know that their economy cannot survive unless — unless they reform.

    But you have the mercantilist, protectionist hawks in China that think they can only grow China on the backs of everybody else.

    So, they're going to fight that out. But, either way, we are protected here in America, because we will either get a good implemented deal, or we will get proportionate response measures with a fully enforceable deal.

    This is — can't lose.

  • Judy Woodruff:

    One other thing I want to ask you, Peter Navarro.

    President Trump frequently argues, the American people — and you said this a moment ago — that tariffs aren't bad for the American people.

  • Peter Navarro:

    Tariffs are great. They're good. We have proven that.

  • Judy Woodruff:

    OK.

    Economists at the Federal Reserve Bank, respected institution, have done a lot of research. They have come back. And we see it again today. They are saying the reality is — and I'm quoting from just the latest one analysis — "U.S. tariffs continue to be almost entirely borne by U.S. firms and U.S. consumers."

  • Peter Navarro:

    So the long answer to that was published yesterday in an op-ed I did in The Wall Street Journal. Your learned audience can go to that.

    The short answer is, the economics profession is bankrupt in terms of analyzing tariffs. They look at it — a very narrow framework.

    Tariffs for the Trump administration have saved our steel and aluminum industry and brought billions of dollars in new investment into that industry. The threat of tariffs have brought billions more investment in from our auto industry, from both domestic companies like GM, but also BMW and others.

    So they're working there. With Mexico, when we threatened tariffs, we got more out of Mexico in terms of helping border security there. The tariffs have been the only thing that have gotten China to the bargaining table.

    So you have to think about tariffs strategically, like this president does. They're working beautifully for America.

  • Judy Woodruff:

    Peter Navarro, senior adviser to the president on trade, thank you very much.

  • Peter Navarro:

    Great to be with you tonight.

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