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Businesses Say Trade Deal Is a Good First Step but Want Tariffs to End -- 3rd Update

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01/15/2020 | 08:24pm EST

By Katy Stech Ferek and Timothy Puko

WASHINGTON -- U.S. business leaders generally applauded the signing of a U.S.-China trade pact but stressed the need to keep negotiations going on an accord that could result in a lifting of tariffs on Chinese imports.

Corporate executives see the deal as a sign of de-escalation that can improve conditions for investment and raise hopes for a more comprehensive truce to come.

Goldman Sachs Group Inc. Chief Executive David Solomon said the deal signing has helped contribute "to a supportive market-making backdrop relative to a year ago." A lawyer for Intel Corp., the largest U.S. chip maker, said he hoped the deal would lead to greater trade cooperation between the U.S. and China. Boeing Co. Chief Executive David Calhoun said leaders who came together are "building a fair and mutually beneficial trading relationship."

Joe Hinrichs, Ford Motor Co.'s president of automotive, said the Detroit auto maker is "encouraged by the efforts of both governments to resolve remaining issues through continued negotiations."

Trade groups that represent businesses in Washington, D.C., joined the chorus. "We commend both governments for staying the course and taking this important step to rebuild trust and restore some stability in the world's most important commercial relationship," said U.S. Chamber of Commerce Chief Executive Thomas J. Donohue. "This deal provides much needed certainty to American businesses as they begin the new year."

President Trump's tariffs remain on roughly $370 billion of Chinese-made items, though he recently agreed to cut the tariff rate in half, to 7.5% from 15%, for some categories of goods. At the signing Wednesday, he promised to remove the tariffs if the U.S. and China can reach a deal on more broad-sweeping economic policy changes in the next round of negotiations.

"The work isn't done yet," said Craig Allen, president of the US-China Business Council. "Implementation of the agreement will be critically important. Moreover, the phase one agreement should be swiftly followed by continued phase two negotiations on remaining issues."

Cinnamon Rogers, executive vice president of advocacy for the Computing Technology Industry Association, said the deal "signals a turning point for the U.S. tech sector." It includes stronger protections -- and punishments -- for the theft of American technology, while making it easier for U.S. businesses to convince authorities to initiate a criminal investigation in China when violations occur. She, like many others, urged the administration to keep pushing forward on robust enforcement of China's commitments and toward a second deal that sets terms for broader reforms.

"It all sounds great in theory," said Dan Harris, a Seattle lawyer whose firm advises companies of all sizes on operating in China. "The problem is, China has a long history of putting very-good-looking things into law, especially its intellectual-property laws, and then not following through when it doesn't want to."

While electronics companies stand to benefit from the lighter tariffs, the Trump administration has shown no sign that it would ease restrictions on sales of chips to some of China's largest companies, which have hurt chip companies' revenues.

An index of major semiconductor stocks was down more than 1% at the market's close on Wednesday, despite a broader market uptick after the agreement.

"While the tariff issue in the near-term is removed and a dark cloud is cleared, now the focus shifts to the details and roadmap for a Phase Two deal and the specifics around IP protection and other forced technology transfer issues which make this a murky situation," Wedbush Securities analyst Dan Ives said in an emailed note.

Officials at the Business Roundtable said they would monitor the deal's implementation closely and help with negotiations "to address further unfair trade and investment practices."

Business leaders have been vocal about their opposition to tariffs since President Trump threatened to impose them in early 2018 and through several waves of tariff increases that followed. The tariffs have hit the retail sector especially hard, and industry officials gave measured praise of the signing on Wednesday.

"The trade war won't be over until all of these tariffs are gone," said National Retail Federation President Matthew Shay, who attended the signing.

A Walmart Inc. spokesman said the retailer is pleased with the signing but hopes that the deal "will lead to a comprehensive agreement that allows for the removal of all tariffs."

The American Apparel & Footwear Association was one of the few groups to raise complaints about details in the agreement. President and CEO Steve Lamar said the U.S. plan to use tariffs as an enforcement mechanism in the future could further hurt consumers.

"We do not see taxing American citizens as an effective way to change policies and practices in China," Mr. Lamar said.

Footwear Distributors and Retailers of America President Matt Priest said the deal "will provide a little more certainty... which is key to job growth and retail price stability for shoe consumers." Footwear tariffs are still averaging 12.2% and reach up to 67.5% on some children's shoes, he added.

"Tariffs raise costs on consumers, and shoe tariffs hurt working families the most," Mr. Priest said. "That is why we have said tariffs on shoes should not be used as a weapon in this continuing trade war."

The Outdoor Industry Association, which represents more than 1,300 manufacturers, suppliers and retailers in the recreational sector, estimated that its companies paid $7.7 billion in tariffs on products from China from January to November last year, up from $5.2 billion during the same period in 2018. The association's vice president of government affairs, Patricia Rojas-Ungar, applauded the deal but said her organization would continue to push for tariff elimination.

Ethanol producers were among a few groups that were unequivocally happy about the deal. The farming community has been largely shut out of the Chinese market during the trade war and stands to be one of the agreement's biggest winners because of guarantees of billions of dollars of rising farm and food exports to China.

"America's ethanol producers have experienced significant economic losses due to punitive Chinese tariffs on our products, and we are eager to return to a more open trading relationship with China," said Geoff Cooper, leader of the Renewable Fuels Association, an ethanol advocacy group.

Alcoa Corp. Chief Executive Roy Harvey said more negotiations could help the company as it looks for stronger growth. "That gives us the catalyst for improvements happening more quickly," he told analysts on a call about fourth-quarter results.

Business leaders indicated they expect the tension between the two economic giants to remain a financial drag on their operations in the near future.

"We are making our business projections on the assumption that protectionism to some degree is here to stay," said Ricaurte Vasquez, administrator of the Panama Canal. "We prefer more open markets, more open trade.

--Paul Page, Asa Fitch, Theo Francis, Micah Maidenberg and Sarah Nassauer contributed to this article.

Write to Katy Stech Ferek at katherine.stech@wsj.com and Timothy Puko at tim.puko@wsj.com

Stocks mentioned in the article
ChangeLast1st jan.
ALCOA CORPORATION -0.51% 15.67 Delayed Quote.-27.15%
BOEING COMPANY (THE) -0.68% 340.49 Delayed Quote.5.24%
CBOT ETHANOL FUTURE (EH) - CBR (FLOOR)/C1 1.12% 1.358 End-of-day quote.-2.33%
FORD MOTOR COMPANY -1.82% 8.1 Delayed Quote.-12.90%
GOLDMAN SACHS GROUP INC. -0.53% 237.08 Delayed Quote.3.66%
INTEL CORPORATION -0.25% 67.27 Delayed Quote.12.40%
WALMART INC. 0.38% 117.89 Delayed Quote.-1.18%
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