President Donald Trump has finally signed his phase one trade deal, but it’s still unclear whether China will abide by the terms of the weakened agreement.
To paraphrase Yoko Ono, the trade war is over (if you want it). The phase one deal has been signed, and China’s Vice Premier Liu He can return home happy in the knowledge that he no longer has to contend with the vagaries of American political grandstanding. Everybody is completely beside themselves.
The signing of the deal means that we are also now allowed to know what’s inside it.
The deal preserves most of Mr Trump’s tariffs, while China has agreed to buy some $200 billion worth of American agricultural and manufactured products. Whether it can actually deliver the promised rivers of milk and honey remains in question; there are no concrete details for how China will import the goods, or what it will actually import. Probably pork.
The deal also does little to address any of the big issues, including China’s use of subsidies to ensure the economic primacy of its state-owned enterprises and a whole host of very worrying cyber security issues. In effect, the deal preserves the status quo – we’ve arrived back in 2016, and everything old is new again.
This is a public relations win for Mr Trump. A trade war deal – along with strong employment data and Democrat infighting – could take him into office in November. It will also help distract from the fact that he’s about to be impeached, though that’s probably not as worrying as some make it out to be.
Whether the phase one deal is an economic win remains to be seen. It will be difficult to ascertain its effects until China starts buying, and they could still shrug their new obligations off. The punitive measures contained within the deal are limited, and China has dealt with tariffs before.
Phase one has done little to change the situation. And with a phase two deal a long way from a sure thing, it’s hard to see how this small win can be parlayed into a decisive victory.