0 $
2,500 $
5,000 $
115 $

US-China Economic War Continues Despite Phase One Trade Agreement Signed


US-China Economic War Continues Despite Phase One Trade Agreement Signed

Click to see full-size image

On January 15th, US President Donald Trump and Chinese Vice Premier Liu He signed the Phase One Trade Agreement with China.

Trump said that relations with China “have never been better” and that “it’s the best it has ever been.”

Trump said: “Today, we are taking a momentous step towards a future of fair and reciprocal trade. Together we are righting the wrong of the past.”

“At long last Americans have a government that puts them first at the negotiating table,” he said. “This is the biggest deal anybody has ever seen.”

In attendance at the signing ceremony were Henry Kissinger, and media and business leaders including Stephen Schwarzman, the chairman of Blackstone, and Ajay Banga, the president of Mastercard, in addition to almost every member of the Trump cabinet.

The first phase of the deal will further open the Chinese market to US companies, and includes roughly $200bn in Chinese purchases of American goods and services.

Separate into categories, this is what China pledged to purchase:

  • Manufacturing goods: at least $32.9bn more in 2020, rising to $44.8bn more in 2021
  • Agricultural products: at least $12.5bn more in 2020, rising to $19.5bn in 2021.
  • Energy products: at least $18.5bn more in 2020, rising to $33.9bn in 2021
  • Services: at least $12.8bn more in 2020, rising to $25.1 in 2021

What remains is most of the $360bn worth of tariffs that the US has already imposed on Chinese goods, and the threat of additional punishment if Beijing does not live up to the terms of the deal.

But there is skepticism about the deal, and most experts consider it that a full-fledged trade war is brewing and that the deal doesn’t really do anything to stop it.

Nick Marro, an analyst at The Economist Intelligence Unit expressed his concerns at the deal. He considers that China may not be able to live up to its pledge to purchase $200bn worth more of US goods, and even if it does, the deal only lasts until 2022.

Tim Drayson, Head of Economics at Legal & General Investment Management (LGIM) was also skeptical of the deal.

“First, the majority of the existing tariffs remain in place, with no timetable for their removal. Second, it will be difficult for China to meet its target for purchases of US goods.

Third, the deal lacks a credible enforcement mechanism. Finally, progress on the key structural issues remain extremely limited.”

Separately, trade relations between the US and the EU are also complicated.

The Trump administration is weighing whether to impose tariffs on $2.4 billion in French products. The United States has argued that France’s tax, which affects large American tech firms such as Facebook and Google, represents a barrier to trade.

The Trump administration imposed a 25% tariff on most European wine in October, in retaliation for government subsidies received by planemaker Airbus.

Brexit is also nearing on January 31st, and the UK is sure to seek a trade deal with the EU, and that would also be a difficult negotiation. Thus, a promise of a trade war, with not only the US on one side, and China on the other is not completely unlikely.




Do you like this content? Consider helping us!