The preliminary pact that both sides are set to sign includes a section that's intended to prevent China from manipulating its currency to gain trade advantages.
The initial decision to brand China as a manipulator had come in a surprise announcement in August, reversing a Treasury finding in May that no country was manipulating its currency. The United States had not put any country on the manipulation blacklist since the Clinton administration branded China a manipulator 26 years ago. Trump had long accused China of manipulating its currency, even though most independent experts concluded that Beijing had stopped doing so years ago.
The designation was largely symbolic. It obliged the United States to enter into negotiations to resolve the currency problem that could ultimately lead to the imposition of economic sanctions such as higher tariffs on Chinese goods – something the Trump administration was already doing in its tit-for-tat trade war with China.
Trump is scheduled to sign the Phase 1 agreement on Wednesday after which administration officials said the text of the deal will be made public. In a fact sheet on the deal released Dec. 13, the administration said the agreement would address '"unfair currency practices by requiring high-standard commitments to refrain from competitive devaluations and targeting of exchange rates."'
The signing of the Phase 1 agreement caps a rocky two-years of trade conflict between the two nations in which punitive tariffs were imposed on billions of dollars of products from each nation. The battle escalated uncertainty and caused businesses to pull back on their investments, slowing global growth. It also roiled financial markets with fears that the trade war could become serious enough to push the U.S. economy into a recession.
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