Trump announces limited trade deal with China

President TrumpDonald John TrumpPelosi arrives in Jordan with bipartisan congressional delegation Trump says his Doral resort will no longer host G-7 after backlash CNN's Anderson Cooper mocks WH press secretary over Fox News interview MORE on Friday said he and Chinese Vice Premier Liu He had agreed on a limited trade deal that would ease the ongoing trade war between the world’s two largest economies and potentially set the stage for a more significant deal down the road.

"We've come to a very substantial phase one deal," Trump told reporters following the meeting.

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The principles of the deal, which Trump said would be written over the next three weeks, cover financial services, agriculture and some intellectual property issues. Trump suggested he could sign the deal next month when he and Chinese President Xi Jinping will be in Chile for the Asia Pacific Economic Cooperation (APEC) meetings. Negotiations on a second phase, he added, would continue after the signing of the first phase.

As part of the deal, Trump would suspend a scheduled 5 percentage point tariff increase on $250 billion of Chinese imports due to go into effect Tuesday. Trump said he remains undecided about the fate of a new set of 15 percent tariffs scheduled to go into effect on $156 billion of Chinese imports in mid-December. 

China agreed to buy $40 billion to $50 billion in agricultural products, relieving pressure on farmers, a key constituency that has suffered under the ongoing trade war.

But the deal must still be written and signed by both parties, and it steered clear of broader issues Trump hoped to address when he embarked on the trade war last year, including broader intellectual property issues, forced technology transfer and massive Chinese industrial subsidies.

Overnight, China announced a timeline to allow greater foreign ownership of Chinese financial firms.

Trump said that the deal remained "subject to getting everything papered," and while he expressed optimism that it would not fall apart in the coming weeks, the prospect remained.

"Anything can happen. That can happen. I don't think it will," he said.

Meanwhile, Xi penned a letter to Trump following the talks encouraging further cooperation, but making clear that disagreements remained.

"With our two teams making progress on some parts of the agreement under consultation, it is important that we address each other's concerns properly and make positive headway in other areas as well," he wrote.

For example, the two sides still have to work out details on an enforcement mechanism.

Reports leading up to Friday’s meeting signaling the possibility of a partial deal with China caused markets to spike, a sign of optimism leading into Trump’s Oval Office meeting with Liu. Trump expressed optimism in a series of tweets earlier Friday.

Markets dipped slightly upon news of the limited agreement.

Trade experts had been pessimistic that the discussions would lead to a comprehensive agreement and say that the longer the trade war goes without a resolution, the harder it becomes to actually broker a deal.

The Chinese delegation arrived in Washington to begin high-level negotiations with the Trump administration Thursday.

Friday’s agreement marked a turnaround in the negotiations after months of discord. In May, talks on a larger deal backslid, leading to increases in tariffs and retaliatory tariffs.

A June meeting between Trump and Chinese President Xi Jinping aimed to restart the talks, which again fell apart amid growing distrust, leading to another round of tariff increases.

Over the past several weeks, however, both sides took several conciliatory measures, as China bought up U.S. soybeans and the U.S. delayed further tariff increases on Chinese imports.

While the deal represents a small win for Trump, the question of whether a broader deal that would end the trade war, eliminate the tariffs and redefine the U.S.-China trade relationship remains open.

Business groups have blamed the trade war for growing uncertainty and propelling a decline in economic output, and have pushed for a deal that would eliminate the tariffs altogether.

They praised the decision to scrap October's tariff increase, but remained concerned about the uncertain path forward.

"Although this is a step in the right direction, the uncertainty continues," said National Retail Federation Senior Vice President David French.

Farmers for Free Trade, a group devoted to opening agricultural trade, was lukewarm on the news. Agricultural interests have been particularly hard-hit by the fight.

“While we are pleased that tariffs aren’t going up, this agreement seemingly does nothing to address the crippling tariffs farmers currently face," the group's Co-Executive Director Brian Kuehl said.

Americans for Free Trade, a coalition of businesses opposed to the trade war, noted that American consumers would remain stuck with the effects of the tariffs until a deal was reached.

"Until tariffs are completely repealed, American businesses, farmers and consumers – not China – will continue paying the price of this trade war," spokesperson Jonathan Gold said. 

-- Updated at 6:10 p.m.