Tariff rollback ‘smaller than expected’

Amid a slew of headlines and tweets, a long-awaited phase one trade deal between the U.S. and China has finally been agreed upon. However, Goldman Sachs is not so happy about it.

As part of the limited deal, the U.S. said it will maintain 25% tariffs on approximately $250 billion of Chinese imports while reducing tariffs on $120 billion in products to 7.5%. The rollback in duties is “smaller than expected,” according to Goldman’s chief economist Jan Hatzius.

“The reduction is only half as large as our baseline assumption,” Hatzius said in a note. “There is still some uncertainty regarding the status of this agreement, as it appears once again that some technical and legal details are still in flux.”

U.S. Trade Representative Robert Lighthizer said the two sides hope to sign the deal in the first week of January in Washington. He also cautioned the Trump administration has not promised a future rollback of tariffs, adding it would be wise to be skeptical on whether China would deliver on certain agreements.

The representative also said in a statement Friday the deal addresses “intellectual property, technology transfer, agriculture, financial services, and currency and foreign exchange” and “includes a commitment by China that it will make substantial additional purchases of U.S. goods and services in the coming years.”

“Neither U.S. nor Chinese officials have been specific about what the reforms are, nor has there been any detail provided regarding the size of Chinese agriculture purchases from the U.S.,” Hatzius said.

Chinese officials said Beijing will increase agricultural purchases significantly without specifying by how much. Meanwhile, Lighthizer said China pledged to buy a total of $40 billion in agricultural products. Those purchases will be made over a two-year period, according to National Economic Council Director Larry Kudlow.

While still short on details, many analysts said the deal is positive for stocks as it could boost business confidence and that should spill over to more investment spending and higher corporate profits.

— CNBC’s Michael Bloom contributed reporting.