Absolutely Done

Larry Kudlow, Director of Economic Council, says Trade Deal 'Absolutely' Done, U.S. Exports to China Will Double.

The so-called Phase One trade deal between Washington and Beijing has been “absolutely completed,” a top White House adviser said on Monday, adding that U.S. exports to China will double under the agreement. “They’re ... going to double our exports to China,” National Economic Council Director Larry Kudlow told Fox News Channel.

Double? Really?

Under the trade agreement announced last week, Washington will reduce some tariffs on Chinese imports in exchange for Chinese purchases of agricultural, manufactured and energy products increasing by about $20 billion over the next two years.

US Trade Facts

Let's see what the US Office of Trade has to say about trade with China.

  • Goods exports totaled $120.3 billion; goods imports totaled $539.5 billion. The U.S. goods trade deficit with China was $419.2 billion in 2018.
  • U.S. goods exports to China in 2018 were $120.3 billion, down 7.4% ($9.6 billion) from 2017 but up 72.6% from 2008. U.S. exports to China account for 7.2% of overall U.S. exports in 2018.
  • The top export categories (2-digit HS) in 2018 were: aircraft ($18 billion), machinery ($14 billion), electrical machinery ($13 billion), optical and medical instruments ($9.8 billion), and vehicles ($9.4 billion).
  • U.S. total exports of agricultural products to China totaled $9.3 billion in 2018, our 4th largest agricultural export market. Leading domestic export categories include: soybeans ($3.1 billion), cotton ($924 million), hides & skins ($607 million), pork & pork products ($571 million), and coarse grains (ex. corn) ($530 million).

Math Check

If China buys an extra $10 billion a year the increase will be 10 / 120.3 = .083 or 8.3%.

Since double means 100%, I would like Kudlow to double check his numbers.

Deal Done?

"Absolutely," says Kudlow.

But asked if officials still planned to sign the deal the first week of January, Kudlow said: “That’s the hope.” Translations were still being worked out but he did not expect any changes to the final Phase One agreement, he added.

So, there may or may not be changes, but but the deal is absolutely done.

What About Phase Two?

  • Kudlow: “Phase Two and its outcome will depend in some way on the success of Phase One. The two are going to be linked.”
  • Trump: Negotiations on a Phase Two trade deal between the two economic giants would start immediately.

Kudlow says phase two depends on phase one, but Trump is ready to blast ahead now.

Mysterious Details

At long last we absolutely have a deal. But what the hell is in it?

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On December 14, I commented Trump's Amazing Trade Deal: Details a Complete Mystery

Can't Look Under the Hood

OK. China will buy some more soybeans, but probably no more than they were buying before. In return, Trump phases out some tariffs. Otherwise it's top secret. Shhhh.

Neither government submitted a full text or even a detailed summary of the deal, hamstringing efforts to determine the winners and losers in the world’s two biggest economies or the quality of the agreement.

US Agrees to Buy More Ag Products From China

China will not disclose it's actual commitment. And the US won't do so either. But this line caught my eye.

Chinese officials, declining to specify how much China expects to buy from the U.S. as part of the near-term deal, also said the U.S. had agreed to increase its imports of Chinese agricultural products.

This is hard to digest without specifics, but it appears China will buy more soybeans if the US will buy more baby food, water chestnuts, or dog food.

Urgent Task

Liao Min, China’s Vice Finance Minister and a trusted aide to Mr. Liu, the chief negotiator, said: “The urgent task right now is to get the phase-one agreement signed and implemented.”

Silly me. I thought the urgent task was to keep everyone from looking under the hood.

Of course, that presumes there is a car.

Things That are a Mystery

  1. Kudlow's math.
  2. Intellectual property.
  3. What's under the hood? Specifics of all kinds, but especially the agricultural products of China the US agreed to buy more of.

Trump's Plan

Somehow Kudlow was not in the loop, but Trump wants to play the "deal in progress" story for another 9 months, starting "immediately".

Things in the "Not a Mystery" Category

  1. Phase Two will be the best trade deal in the history of the world.
  2. The deal will be so good, it will even surprise Trump.

Someone, please get Kudlow in the loop.

Oh, also sign him up for a math lesson.

Mike "Mish" Shedlock