Will the trade shifts sparked by the US-China phase-one deal make the dollar weaker, as Donald Trump wishes? Maybe

As China buys more US goods, possibly at the expense of trade partners in Europe, Japan and Australia, movements in currency markets will make winners of some

An overall strengthening of the renminbi, as is likely, may in the end encourage US dollar strength vis-a-vis other currencies

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US President Donald Trump – flanked by Chinese Vice-Premier Liu He (left) and US Vice-President Mike Pence at the signing ceremony of the US-China phase-one trade deal in the White House on January 15 – took the opportunity to restate his view that the US dollar is “very high”. Photo: EPA-EFE

Published: 1:00am, 22 Jan 2020Updated: 1:31am, 22 Jan 2020

With the phase-one trade agreement between China and the US now signed, currency market participants will look to identify the likely winners and losers. This might be a bilateral deal, but its consequences will affect others.

“The devil is in the detail,” European Union trade commissioner Phil Hogan said last Thursday. China and the US “have stepped outside the usual framework for doing deals … and they are dealing directly on a bilateral basis”, adding that the EU would have to assess whether the deal is compliant with World Trade Organisation rules.

Hogan’s caution is understandable as this phase-one deal is potentially bad news for EU exporters. But it’s a done deal and it seems highly unlikely that it will be unpicked.

As it stands, over the next two years, China has committed to purchasing at least US$200 billion of US goods and services more than it did in 2017. That comprises around US$77 billion of US manufactured goods, US$52 billion in energy, US$32 billion in agricultural goods and US$38 billion in services.

On Thursday, Japan’s Nomura Bank noted that Germany and Japan have consistently been among “the top five sellers of industrial machinery, electrical equipment, pharmaceutical products, medical instruments and vehicles [classified as manufactured goods in the phase-one agreement] to China” and that “Germany and France have also been the second and third largest sellers of aircraft to China, after the US”.