The deal exposes U.S. allies to trade shocks
Chad Bown makes some interesting observations on the recently concluded phase one of the US-China trade deal:
- Beijing has agreed to import an additional $200 billion worth of American goods and services over the next two years. Chad Bown argues that this is an unrealistic target and the evidence of shortfalls in those Chinese purchase pledges won’t be clear until after the presidential election in November 2020;
- The US has adopted a “managed trade” approach to expanding US exports. This method though may divert international commerce i.e. the Chinese might purchase more American soybeans by cutting back on imports of oilseeds from Brazil. As a result this agreement may test the exports of many countries to China, several of which are traditional US allies;
- Finally, U.S. tariffs on hundreds of billions of dollars of trade remain in place while the agreement did not even touch major systemic issues behind the trade war, such as China’s subsidies and state-owned enterprises.
Unappreciated hazards of the US-China phase one deal
By: Chad P. Bown – Peterson Institute
