China’s trade war deal ‘may be doomed from start’ as scepticism mounts over capacity to buy US products

Analysis continues to flood in suggesting that if China continues to insist it will buy US goods according to market conditions, it cannot meet Donald Trump’s demands

With 28 per cent of US exports to China not covered by the deal, economist Chad Bown suggests that these exporters could be cut out of the equation

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China has committed to buying an additional US$200 billion of US goods over two years, including a clause that would bring its imports of US farm goods to more than US$40 billion a year. Photo: Reuters

Published: 6:04pm, 21 Jan 2020Updated: 2:49pm, 17 Feb 2020

Almost a week after the signing of the phase one trade deal with the United States, scepticism is continuing to mount as to whether China will fulfil its side of an agreement that “may be doomed from the start”.

Of particular concern is China’s commitment to buying an additional US$200 billion of US goods over two years, including a clause that would bring its imports of US farm goods to more than US$40 billion a year.

“A close look at the data shows that the numbers are even more unrealistic than first believed,” wrote Chad Bown, a trade specialist at the Peterson Institute for International Economics (PIIE), in a new report. “Even worse, hostilities might renew, leading to a re-escalation of trade tensions currently on hold.”

At the crux of much of the widespread pessimism is China’s repeated mantra that imports must be based on market conditions, a stance that was reiterated on Tuesday by Li Xingqian, head of the foreign trade department, who told a press conference in Beijing: “We will expand imports from the United States based on the principles of the market and World Trade Organisation rules, and will not affect imports from other countries.”

A close look at the data shows that the numbers are even more unrealistic than first believed

Chad Bown

These criteria appear to jar with a deal that will inevitably cause trade diversion, experts have said. Unless there is a surge in demand in China, which is unlikely given the slowing growth in the world’s second largest economy, the US purchases will come in place of others.

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