The US signed the first phase of a trade deal with China, which President Donald Trump described as historic, concluding more than a year of tough negotiations, including several months of suspension of talks between the two largest economies of the world.

China will boost purchases of US goods and services by $200 billion over two years in exchange for the rolling back of some tariffs under an initial trade deal signed by the world’s two largest economies, defusing an 18-month row that has hit global growth.

The agreement was signed by Trump and Liu He, politburo member and vice-premier of the People’s Republic of China.

The two countries are “righting the wrongs of the past”, Trump said, adding that he would soon visit China and thanked his Chinese counterpart for this deal.

Chinese President Xi Jinping, in his letter to Trump which was read out at the signing ceremony in the White House, said the phase one deal was good for China and the US and it needed to be earnestly implemented by both sides.

How did the trade dispute evolve?

The world’s two largest economies have spent 18 months embroiled in a bitter trade dispute that imposed tit-for-tat levies on each other’s commodities, mechanical parts and finished goods.

Trump had launched the trade war with China in 2018, demanding Beijing to reduce their massive trade deficit.

His demands included an intrusive verification mechanism to supervise Beijing’s promise to protect intellectual property rights, technology transfer and more access to American goods to Chinese markets.

So far, the US has imposed tariffs on more than $360 billion of Chinese goods, and China has retaliated with tariffs on more than $110 billion of US products.

Beijing and Washington touted the phase 1 agreement as a step forward after months of start-and-stop talks, and investors greeted the news with relief.

What are the highlights of the deal?

The first phase of the trade deal includes intellectual property protection and enforcement, ending forced technology transfer, dramatic expansion of American agriculture, removing barriers to American financial services, ending currency manipulation, rebalancing the US-China trade relationship and effective dispute resolution.

The centrepiece of the deal is a pledge by China to purchase at least an additional $200 billion worth of US farm products and other goods and services over two years, above a baseline of $186 billion in purchases in 2017, the White House said.

Commitments include $54 billion in additional energy purchases, $78 billion in additional manufacturing purchases, $32 billion more in farm products, and $38 billion in services, according to the deal documents.

Liu said Chinese companies would buy $40 billion in US agricultural products annually over the next two years “based on market conditions” which may dictate the timing of purchases in any given year.

Key world stock market indexes climbed to record highs on news of the deal, before stalling on concerns it may fail to ease tensions, with numerous thorny issues unresolved.

Phase 2 of the deal soon

The deal fails to address structural economic issues that led to the trade conflict, does not fully eliminate the tariffs that have slowed the global economy, and sets hard-to-achieve purchase targets, analysts and industry leaders said.

Trump, who has been touting the phase 1 deal as a pillar of his 2020 re-election campaign, said he would agree to remove the remaining tariffs once the two sides had negotiated a phase 2 agreement.

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