U.S.-China Deal

Source: Canada US
Link: U.S.-China Deal

Over the weekend, President Trump announced a deal with China. The result is the 10% tariff imposed on goods on List 3 of Chinese made goods will remain in place for an additional 90 days rather than increase to 25% on January 1, 2019. The challenge is there was no joint communique issued by the parties. As a result, the actual parameters of the deal are open to doubt.

China supposedly agreed to buy large quantities of American soybeans, but President Xi’s speech regarding that portion of the deal conditioned those purchases on “domestic needs.”

Another key consideration is what is viewed as China’s on-going efforts to take American technology by whatever means available.   Mr. Trump (and industry) wants that stopped, but since no specifics were announced, how will success on this topic be measured?

There was also supposedly a deal reached wherein China will purchase American energy and industrial goods, but again, nothing concrete was documented, so how success in this area , too, is to be measured is also an open question.

While any decrease in the trade tensions between the two countries is a good sign, the latest results can only be viewed as a temporary ceasefire which could go horribly wrong later if the two sides were not clear between them as to what deal was made.

President Trump announced that he would impose the 25% tariff on the List 3 goods if “sufficient” progress had not been made within 90 days, but President Xi’s own announcement made no mention of any deadline or the possible 25% rate increase. Admittedly both leaders put their own spin on the outcome for domestic consumption. What this situation establishes once again is that without a joint statement, too much is left open to chance, and predictability is the best framework to allow business to flourish.

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