After "Phase One" of the U.S. China Trade Deal was signed on Wednesday is an elaborate ceremony in the White House, the leaders of both countries seemed to think they came out on top. However, analysts and investors on Wall Street have a different perspective. With China saying their purchases of American goods will be "based on market demand" and hazy mechanisms for appeal in the deal itself, it's unclear whether America really came out on top. So far, the consensus seems to be that the deal was either a win for China, or a wash.
The agreement includes intellectual property protections which were a condition of the deal from the beginning for the Trump Administration. Other boons for the U.S. include forced technology transfer and currency rules; although, there are signs China had been intending to make similar changes anyway to help their own economy. One of the grey areas in the deal is the pledge from China to ramp up purchases of U.S. exports by $200 billion in two years. Market experts say the amounts promised, while they are large amounts, aren't a significant improvement compared to pre-trade-war levels. This isn't an unfair comparison either, considering this deal was preceded by an internationally damaging trade war meant to give America a "big win" and a better deal with China.
Still, President Donald Trump has told reporters there is "total and full enforceability" for each section of the agreement. While this may seem like a good thing at first glance, the enforcement mechanism in place is more tariffs, one of Trump's most favorite - and least popular, tools. The deal itself doesn't lift sanctions on $370 billion worth of Chinese imports, meaning American consumers and manufacturers will continue to pay higher amounts for the goods they need to do business.
One thing this deal does represent is a halting of retaliations between the two countries, an unequivocally good thing.
The vague wording of the deal is a big part of what is giving experts pause. The deal requires China to increase purchases of U.S. agricultural goods by 80% over the next two years, but, according to David Dollar, a senior fellow at the Brookings Institution, "It's redistributing income from one group of firms to another one in a very complex way. It's not obvious it's a benefit for the U.S. economy." The amounts lack the specificity farmers need to know in order to anticipate demand and produce goods accordingly. Enforcing this sort of control over trade can also raise the price of those goods and distort the market. Promising this sort of purchase may also violate rules put in place by the World Trade Organization; although, the White House has worked hard for a long time to disempower that body.
If either country feels the other isn't fulfilling their part of the deal, they can make a complaint. However, if the country being complained against feels the dispute is resolved unfairly, their only recourse is to leave the agreement all together. According to U.S. Trade Representative Robert Lighthizer, the deal hinges on whether or not the dispute process functions effectively and keeps both parties at the table. "If the dispute settlement process works, we're going to be OK, and if it doesn't, we won't."
