US-China Phase 1 deal reached – ABN AMRO

Han de Jong, chief economist at ABN AMRO, points out that the US and China have, allegedly, reached a so called ‘Phase 1’ deal.

Key Quotes

“The agreement still has to be written into law so we are not there yet, but still. Under the terms of the deal China will significantly increase its purchases of agricultural produce. Let’s see how that goes. The swine flu has sharply reduced the pig population, so I would think China needs a lot less pig food, but we will see. In addition, the Chinese will step up their actions to prevent intellectual-property theft of American companies.”

“The Americans will not introduce new levies that were planned for 15 December and there is talk of the possibility that tariffs already imposed will be reduced. However, there is criticism now both from Republican ranks as well as from Democrats that president Trump will give away a strong leverage if tariffs are reduced. The fact that a deal has been reached is good news as it reduces uncertainty.”

“A reduction of already imposed tariffs would be a bonus to the world economy in my opinion. Many commentators argue that the uncertainty is more important than the tariffs themselves. That may be the case, but it doesn’t mean that the tariffs themselves aren’t damaging.”