China Is Completely Folding on Trade

You might have seen news that President Trump signed a phase 1 trade deal with China a few weeks ago. When you see what’s in the trade deal, you’ll see that China completely buckled under President Trump’s economic tactics. They just completely folded.

The first part of the deal is a truce on tariffs. Tariffs already in place are remaining in place until the next phase of the deal, but both countries agreed to stop adding tariffs. Seems fair.

The next major item is trade deficits. China agreed to purchase an additional $200 billion in goods from the U.S. every year, starting in 2020. For a little context, China bought less than $200 billion from the U.S. in 2017 in total (the last year before tariffs started). They’re more than doubling what they’ll import from us.

On that same line, China agreed to remove restrictions (other than tariffs) from U.S. farm goods. They will no longer outright ban the import of U.S. pork and other farm goods (which is particularly important right now).

Finally, China agreed to defend intellectual property rights. This is the big one. President Trump turned down multiple offers from China that didn’t include this point. If they can’t steal intellectual property, then they’ll have to play more fairly in international trade. It’s a huge concession.

What did the U.S give up in return? We won’t add any more tariffs to Chinese goods. That’s pretty much it. It’s a laundry list of concessions from China and a huge win for President Trump and America. But, it’s not the end of the story.

 

You may have heard of this small problem China is having with a relatively obscure illness known as coronavirus. Sarcasm aside, roughly 80 percent of China’s GDP producing sectors are currently under partial or total travel restrictions. The country can’t trade at all right now. With anyone. As such, the already weak economy is collapsing fast.

If you watch global markets, you’ll know that stocks tanked when news of the virus first went global. They quickly stabilized, but only because China is burning through cash to float their markets while they try to contain the disease. That can’t last, and China knows it.

They just released $75 billion in tariffs on U.S. pork and soybeans. This is with no concessions from us. These were the very first items China tariffed when the war got going. They’re removing them now because the country is facing a food shortage, and cheap U.S. food can keep people from starving.

With all of that considered, the coronavirus does not seem to be under control in China at all. Travel restrictions will remain for at least a few more weeks, and the Chinese economy can’t handle it. Don’t be surprised if more tariffs disappear and the next phase of the trade deal is a substantially bigger win for President Trump.


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