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China Falls Short of “Phase One” Deal with US 

The US and China will review their progress on the “phase one” trade deal this week – nearly six months after signing the agreement.

The trade deal paused a damaging trade war between the two countries. Trade war started in 2018 and involved imposing retaliatory tariffs on billions of dollars worth of goods.

One of the things the phase one deal addressed the alleged intellectual property theft and forced technology transfers from China.

However, the centerpiece of the trade deal is China’s commitment to buy at least $200 billion more of  US goods and services in 2020- 202.

Even before they signed the trade deal, some experts said it was unrealistic for China to increase its purchases by that amount from the US.

The obligation has been more challenging to meet since the coronavirus pandemic plunged demand in China.

Measuring China’s Progress

According to the trade deal, China will meet its commitments by;

2020: Purchase $63.9 billion more agricultural, manufactured, and energy products and $12.8 billion more services compared to 2017 levels.

2021: Buy $98.2 billion of goods from the three categories and $25.1 billion in services compared to 2017 levels.

According to the agreement, both Chinese and the Us officials will use official trade data to determine whether China met the target.

However, statistics on the US exports to China often doesn’t reflect China’s imports from the US. Partly because the two countries use different data collection methods and standards.

China Falls Short

According to the deal, China should buy $142.7 billion of American goods by the end of this year. That is measured by the US export data, says Peterson Institute for International Economics (PIIE).

But according to the official Chinese import data, the amount should be $172.7 billion.

In the first half of 2020, China bought less than a quarter of its target full-year amount based on both sets of data, PIIE data showed.

PIIE data doesn’t include China’s purchases of services for the US because they are not monthly reports.

 

Deal Unlikely to Break Down

PIIE found that China was far from meeting its part of the commitment in all product categories.

According to data, China shows the least progress in its purchase of energy products during the first 6 months of 2020.

Despite that lag in China’s part in meeting its obligations, the US President’s top economic advisor Larry Kudlow said that China’s purchases of American goods were good.

Kudlow also said that the phase one trade deal would not be avoided; Given the recent deterioration of the US-China relations in recent months. Both countries hit each other significantly recently. They covered a wide range of issues, such as the origin of coronavirus and Hong Kong’s autonomy.

Other observers said it was not in the US’s interest to renew tariff wars with China considering the battered economy.

According to Kelvin Tay, the two superpowers are unlikely to take any action on the trade front.

Kelvin Tay is the regional chief investment officer at UBS Global Wealth Management.

Kelvin Tay added that increasing tariffs further would probably impact the US’s economy worse than how it would affect the Chinese economy. He also sited that the Chinese economy gas been recovering well in the second quarter.



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