The United States and China agreed on the outlines of a partialtrade accord Friday, which President Donald Trump said he and hiscounterpart Xi Jinping could sign as soon as next month.

As part of the deal, China would significantly step up purchasesof U.S. agricultural commodities, agree to certainintellectual-property measures, and make concessions related tofinancial services and currency, Trump said Friday at the WhiteHouse. In exchange, the U.S. will delay a tariff increase due next week as the deal isfinalized, though new levies scheduled for December haven't yetbeen called off.

The agreement marks the largest breakthrough in the 18-month trade war that has hurt the economies of bothnations. Importantly, Trump said the deal was the first phase of abroader agreement. The president indicated he could sign a dealwith Xi at an upcoming November summit in Chile.

While the limited agreement may resolve some short-term issues,several of the thorniest disputes remain outstanding. U.S. goals inthe trade war center around accusations of intellectual-propertytheft, forced technology transfer, and complaints about Chineseindustrial subsidies.

Xi told Trump in a letter—which the White House distributed onFriday—that it's important the countries work together to addresseach other's concerns. "I hope the two sides will act in theprinciple and direction you and I have agreed to, and work toadvance China-U.S. relations based on coordination, cooperation,and stability," the letter said.

Chinese state news agency Xinhua said negotiators made effortstoward a final agreement, but stopped short of calling Friday'soutcome a deal. Hu Xijin, the editor-in-chief of China's mostprominent state-run newspaper, "Global Times," noted on Twitterthat official reports from China didn't mention Trump's goal ofsigning the deal next month, which indicates Beijing wants to keepexpectations low.

Phase Two

The Trump administration also said issues related to HuaweiTechnologies Co. aren't part of Friday's deal and will be aseparate process. The Chinese telecommunications equipment maker,which was placed on an export blacklist in May, will be discussedin a second phase of the negotiations, the president told reporterslater Friday.

Equities advanced globally Friday amid growing conviction thatthe world's two biggest economies would negotiate a trade truce,though U.S. stocks pared gains after Trump's announcement near theclose of trading. Trump tweeted earlier Friday that if thecountries did reach an agreement, he would be able to sign itwithout a lengthy congressional approval process.

Trump's announcement drew a wary welcome from even Republicanson Capitol Hill. "After so much has been sacrificed, Americans willsettle for nothing less than a full, enforceable, and fair dealwith China," Senate Finance Committee Chairman Chuck Grassley saidin a statement after the announcement. "Farmers in Iowa know fartoo well that the trade war has caused real financial pain in theheartland. But we need to know more about this deal, andfollow-through from China will be key."

On Thursday and earlier Friday, Liu and U.S. TradeRepresentative Robert Lighthizer held the first senior-leveldiscussions between Washington and Beijing since a previousagreement fell apart in May and tariffs were raised in the monthsafter.

What Bloomberg Economists Say

"Past experience is that U.S.–China trade agreements aren'tworth the paper they are written on, and this one hasn't even beenwritten down. For now, though, indications on trade are a littlemore positive. If that persists, it could help put a floor undersliding global growth."

|

— Tom Orlik and Yelena Shulyatyeva, Bloomberg Economics

The U.S. was threatening to increase tariffs on Tuesday on about$250 billion of Chinese imports, from 25 percent to 30 percent.More duties on $160 billion of Chinese products were targeted forDec. 15.

The threat of those import taxes on U.S. consumers, fallingaround the holiday season, raised the prospect that the U.S.economy would slide toward a recession heading into Trump's 2020re-election bid. The American manufacturing industry, which Trumpvowed in 2016 to revitalize, is already contracting, in partbecause of the trade war.

The Trump administration said that as part of the deal, Chinawould scale up its purchases of U.S. farm goods over two years, toan annual total of $40 billion to $50 billion. Trump encouragedU.S. farmers to buy more land and Deere & Co. tractors inresponse.

In recent weeks, China had already discussed buying more U.S.products such as soybeans, pork, and wheat. Some traders remainedskeptical that buying soybeans from the U.S. represented asignificant breakthrough in the overall trade talks, Bloombergreported Friday.

Earlier Friday, Trump indicated in a Twitter post that if thecountries did reach an agreement, he would be able to sign itquickly.

One of the great things aboutthe China Deal is the fact that, for various reasons, we do nothave to go through the very long and politically complexCongressional Approval Process. When the deal is fully negotiated,I sign it myself on behalf of our Country. Fast andClean!  — Donald J. Trump (@realDonaldTrump) October 11,2019

Senator Ronald Wyden, the ranking Democrat on the FinanceCommittee that has jurisdiction over trade policy, pushed back onTrump's tweet in a statement Friday to Bloomberg News: "DonaldTrump should know that any meaningful trade deal is only legitimatebecause of the authority granted to him by Congress, and thatauthority can be taken away," he said.

Under the U.S. Constitution, Congress holds power overinternational trade. For decades, it has legally delegatedtrade-negotiating authority to the executive branch. Lawmakers inrecent months have grown increasingly wary of what they see asTrump's abuse of that authority and discussed ways to claw it back,citing the president's many unilateral tariff measures and a lackof transparency in negotiations.

—With assistance from JenniferJacobs, Ye Xie, Isis Almeida, Scott Lanman, Sophie Caronello, andSarah McGregor.

Copyright 2019 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.