US-China trade agreement: New turn of global economy

After months of tension and economic stress, the announcement of a trade agreement between the US and China has finally come as a relief news for the global markets. US President Donald Trump shared information about this historic agreement on his Truth social account and also attached a letter of agreement with it, which makes it clear that this agreement was concluded between the US and China in Geneva. This development has not only given a new direction to bilateral relations, but it is also likely to have far-reaching effects on the global trade structure.

The US-China trade war that began in 2018 had shaken global supply chains. The US had imposed heavy tariffs on China, accusing it of "unfair trade practices", intellectual property theft and imbalanced trade balance. China also retaliated by imposing retaliatory tariffs on American products. These tariffs had a direct impact on global investment, production and prices of consumer goods. America's trade deficit, especially with China, has been the root cause of this war. The US trade deficit with China in 2023 was approximately $382.9 billion, a large part of the US's total trade deficit.

The agreement in Geneva was formally announced by US Treasury Secretary Scott Bessant and US Trade Representative Ambassador Jamieson Greer. Secretary Bessant praised the Swiss government for hosting the meeting, saying that both sides had made 'very significant progress'. Ambassador Greer indicated that the initial differences were not as big as initially estimated, and a solid consensus was reached within two days, indicating that both countries had done in-depth pre-preparation.

The key points of the agreement include China's commitment to open its market to US agricultural products, high-tech equipment and services, and the US giving relief in some tariffs. Notably, the agreement is considered an important step towards reducing the $1.2 trillion trade deficit, which President Trump had termed a "national emergency".

This agreement will not only benefit the US and China, but it will also become a means of bringing stability in the global market. In the past years, the global GDP growth rate had declined by 0.3 to 0.5% due to the trade war. Institutions like the International Monetary Fund (IMF) and the World Bank had repeatedly warned that if the trade war between the US and China continued for a long time, it could lead to a global recession.

Now that the two countries have reached an agreement, it will boost the stock markets, reduce supply chain costs and accelerate investment. Analysts estimate that this could lead to a potential increase of $200-300 billion in global investment. For the Trump administration, this agreement can be seen as a major diplomatic victory at the domestic and international level. On the one hand, it confirms his 'America First' agenda, while on the other hand it shows that a solution can be found through dialogue even with a rival like China.

However, this agreement is not a completely final solution. According to experts, many controversial issues such as the necessity of technology transfer, cyber security, and government subsidies being given to Chinese companies are still not clear. If these aspects are not clarified soon, this agreement will remain only a temporary solution. For India and other developing countries, this agreement gives many messages.

First, that the big powers are now moving towards cooperation rather than confrontation regarding the global trade balance. Second, this is an opportunity for countries like India to take advantage of the new trade situation created between the US and China, especially in the manufacturing and service sector. India is already working towards becoming a part of the 'China + 1' strategy for companies in the US and Europe. If the trade tension between the US and China is reduced, it will help India shape its production and export strategy with more stability.

Overall, this US-China trade agreement in Geneva is not just an economic event, it is a sign of change in the global system. This shows that dialogue and diplomacy, even if delayed, are better options than confrontation. However, the evaluation of the success of this agreement will depend on its transparency, implementation and sustainability. The world is now waiting for tomorrow's detailed briefing, in which the detailed outline of this agreement will be clear.