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U.S., China strike preliminary deal

With help from Doug Palmer and Barbara Moens

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— President Donald Trump is expected to announce a mini trade deal with China today, heading off a fresh round of tariffs that was set to take effect this weekend.

— Republican lawmakers are grumbling they were sidelined during the USMCA negotiations between U.S. Trade Representative Robert Lighthizer and House Democrats. But for now, at least, the complaints are not likely to jeopardize significant support for the deal.

— British Prime Minister Boris Johnson won reelection Thursday, clearing the way for a Brexit deal by January.

IT’S FRIDAY, DEC. 13! Welcome to Morning Trade, where your host needs to learn how to ski by Monday. Send me your best tips, without using the words “pizza” and “french fries”: or @mmcassella.

LIGHTHIZER’S BIG DEAL-MAKING WEEK: On the heels of the announcement of a USMCA deal with House Democrats, the president has signed off on a mini “phase one” trade deal with Beijing, people familiar with the plans told our Adam Behsudi. The White House plans to formally announce the tentative agreement, which codifies what Trump announced in October, later this afternoon. China’s envoy to Washington, Cui Tiankai, could sign the deal today.

What’s in it: As part of the deal, Trump will not move forward with a round of 15 percent tariffs scheduled to take effect Sunday that would have hit $160 billion worth of Chinese imports, including big-ticket items like iPhones. Trump is also expected to reduce duties on roughly $250 billion worth of Chinese goods, including everyday items like shoes, clothing and flat-screen TVs.

Sweetening the deal: Trump was partially persuaded to strike the deal because of a Chinese offer to buy $200 billion worth of U.S. goods and services over the next two years — a total that would include the previous U.S. demand that China buy between $40 billion and $50 billion worth of American farm goods.

Hot and cold: Some groups were quick to applaud the news late Thursday, including the Corn Refiners Association, which called it a “welcome sign of progress.” The Retail Industry Leaders Association struck a lukewarm tone, saying the mini deal offered “some relief” but was only a step toward the ideal scenario of no tariffs and more certainty.

On Capitol Hill, there was bipartisan criticism. Sen. Marco Rubio shrugged off the news, saying that “one China deal isn’t going to solve our problems with China.” “It may get us through some short-term frictions, but we’ve got big systemic problems,” the Florida Republican said.

And three senior Democrats — Sens. Chuck Schumer of New York, Ron Wyden of Oregon and Sherrod Brown of Ohio — wrote to the president to urge him to “stand firm” in the trade negotiations and “sustain the necessary pressure to achieve meaningful concessions.”

CALMING USMCA WATERS IN THE GOP: Lighthizer was dispatched to the Capitol on Thursday to talk down increasingly anxious Republican lawmakers who are growing concerned the updated USMCA might go too far toward meeting Democrats’ concerns. White House legislative affairs director Eric Ueland acknowledged Thursday that “there are people with strongly held points of view” and said administration officials were simply there “to be informative and advocate.”

But being miffed about the process might not necessarily mean lost votes for the deal. Sen. John Cornyn (R-Texas) criticized the negotiations as “unprecedented” and “bad practice” and argued that not holding a mock markup is “a lousy way to treat the Senate.” But asked whether he would vote against the deal, Cornyn replied: “Well, I’m not going to let my irritation over the process overcome my support for free trade.”

No pleasing everyone: Though the USMCA won an elusive endorsement from the AFL-CIO, that doesn’t mean all of organized labor is on board. The International Association of Machinists and Aerospace Workers sent a letter to lawmakers Thursday urging them to vote against the agreement, arguing that it fails to fulfill the promise of “dramatically” replacing the “current trade template.”

“While it contains some improvements, the outsourcing of U.S. jobs to Mexico will continue at an alarming rate under USMCA,” wrote Robert Martinez Jr., the group’s president. “This is not the renegotiated agreement that was promised to U.S. workers and their communities.”

A BIG WIN FOR BORIS: U.K.’s conservative leader Boris Johnson was on track Thursday night to win the country’s election and one of the biggest majorities in Parliament his party has enjoyed in decades. The projected result makes it all but certain the U.K. will officially leave the European Union by its current scheduled exit date of Jan. 31 — with a U.K.-U.S. trade deal likely on deck after that.

In the U.S., some observers say Trump — who often heaps praise on the U.K. leader — could see Johnson’s win as a harbinger of his own fortunes in 2020. Others expect Johnson’s solid win to liberate the pair in preparing for bilateral trade talks. More on the Trump-Johnson relationship here.

EU ADDS WEAPONS TO ITS TRADE ARSENAL: EU trade chief Phil Hogan announced a proposal on Thursday for new countermeasures to strengthen the European Union’s powers under international trade rules. It’s the first legislative proposal of the new team of European Commission President Ursula von der Leyen, who has vowed a “geopolitical” outlook for her agenda.

Is this the bazooka? The proposal is not the full “bazooka” that was originally considered, but it’s a significant response to stasis at the World Trade Organization’s high court that could leave trade disputes unresolved.

“This sends a strong signal that a strong Europe in the world also means a strong Europe in global trade disputes,” Hogan said as he announced the new trade defense tools.

How they work: The new law — an amendment of the EU’s “enforcement regulation” — would allow the EU to impose retaliatory tariffs without a ruling by the WTO’s Appellate Body. However, the new law would still require a ruling by a first-instance panel, meaning the EU would still be bound by the WTO’s dispute settlement system.

The new instrument can only be used if the Commission follows the WTO legal pathway of launching a complaint and waiting months — or years — for a panel ruling. If a country blocks that ruling by appealing it into limbo, the new weapon would be activated.

U.S. SHARE OF GLOBAL TRAVEL MARKET FORECAST TO FALL: The U.S. share of the long-haul travel market is forecast to fall to 10.4 percent by 2023, continuing a slide from the previous high of 13.7 percent in 2015, the U.S. Travel Association said in a new forecast. Growth in travel to the United States is forecast to grow by 2.4 percent annually from 2019 through 2023, but that’s just half the global growth level of 4.8 percent, the group said.

Still, visitors from Canada, Mexico and other foreign countries are expected to spend $360.7 billion on travel to the United States this year, up from $342.3 billion in 2018, the group said.

“International inbound travel is the No. 2 U.S. export, and making its pace of growth a national priority could be a difference-maker in helping to keep the country out of a recession,” U.S. Travel Association President and CEO Roger Dow said in a statement calling on Congress to reauthorize the Brand USA tourism marketing organization.

TRADE RESTRICTIONS ON THE RISE: Trade restrictions by WTO members are at historically high levels, according to new WTO report.

Between mid-October 2018 and mid-October 2019, the amount of trade covered by import-restrictive measures imposed by WTO members was estimated at $747 billion — the highest level since 2012. These new trade-restrictive measures included tariff increases, quantitative restrictions, stricter customs procedures and imposition of import taxes and export duties.

Who’s hurting? The main sector targeted by the new import restrictions were mineral and fuel oils, machinery and mechanical appliances, electrical machinery and precious metals.

— Pass USMCA Coalition drops stance on passing USMCA, The Hill reports.

— USTR filed a Federal Register notice formally concluding a beef hormone dispute with the EU after reaching a deal earlier this year.

— China’s foreign minister is urging a return to cooperation with the U.S., Bloomberg reports.

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