Fake Trade Deal?


I don’t think anyone was fooled by the announcement last Friday that the US and China had resolved their differences and come up with a trade deal. The President was clearly over-stating the position when he said “So, we just made what, I guess, is one of the biggest deals that’s been made in a long time, with China…If you look at the deal, the deal is so incredible. The deal is a great deal.” No doubt he was looking for a ‘win’ with so many other problems to deal with.

However, as suggested by the Hinrich Foundation “the general reaction to the announced deal has been that while the agreement itself accomplishes relatively little, it does avoid a further escalation in tariffs and sets a more constructive tone for future negotiations, and as such it should be regarded as a positive step”. But they go on to say “while this is a fair analysis, it overlooks three important points” and does a good job of spelling out what they are. Click here

Their conclusion is “Where does all this leave us?  Under the best circumstances, we’ll have an agreement in perhaps 5 weeks’ time that accomplishes little of substance other than forestalling one round of scheduled tariff escalation, but hopefully builds confidence.  Under the worst case, a deal which appeared at hand (as was the case in May) will once again slip away, further eroding trust and momentum.  Either way, the hard work of resolving the structural frictions between the US and China will continue to be a long-term endeavor”.

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