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No Deal Yet

Despite the hype, there is no deal. Nothing is signed.

Pleased to Be Behind

Trump is very pleased to be behind where we supposedly were 10 months ago.

It was a great deal then and an even greater deal today.

China Wins

The Wall Street Journal reports China Emerges With Wins From U.S. Trade Truce

China is emerging with wins in this week’s trade talks, with the U.S. shelving new tariffs against Beijing while leaving many demands to be worked out later in return for an assurance of increased agriculture purchases.

The two countries took an initial step Friday to cement a trade agreement that had been derailed for months. President Trump said the U.S. would call off planned tariff increases on Chinese goods next week while Beijing would buy $40 billion to $50 billion worth of American agricultural products—which China hasn’t publicly confirmed.

“If you’re China, you’re pretty happy with the outcome,” Arthur R. Kroeber, founder of Beijing-based consultancy Gavekal Dragonomics, said of the latest trade talks. “China’s negotiation position has always been, the longer you can extend the talks the better.”

Tariff Escalation Risk From Partial Deal

Morgan Stanley warns Tariff Escalation Remains a ‘Meaningful Risk’ Despite Partial US-China Deal.

Morgan Stanley says President Donald Trump’s partial trade deal with China is an “uncertain” arrangement at best and there does not appear to be viable path to reduce existing tariffs at the moment. 

“There is not yet a viable path to existing tariffs declining, and tariff escalation remains a meaningful risk,” the bank said in a note. “Thus, we do not yet expect a meaningful rebound in corporate behavior that would drive global growth expectations higher.”

“Trump’s statement that ‘We are near the end of the trade war’ is not plausible to us,” Evercore wrote in a note. “We do not expect tariff cuts in 2020 – but are ready to be favorably surprised.

“And as long as such punitive tariffs remain, we would describe US-China economic relations as bad, not good.”

Goldman Sachs sees a 60% chance that the announced 15% tariffs will take effect, but expects a delay until early 2020 as opposed to the current deadline of Dec. 15. Evercore said it expects a delay and no additional tariff hikes in 2020.

Seven Deadly Sins

The Hill comments US-China trade deal: What it is, is not, and may become

The U.S.-China trade agreement outlined on Friday is an act of cooperative rivalry. It brings immediate value to both sides while deferring strategic questions about future relations between the world’s two superpowers.

Because the deal remains incomplete and verbal, there can be no definitive judgment about its merits.

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As outlined, however, the “skinny” trade deal largely omits what White House trade adviser Peter Navarro calls the “seven deadly sins” structurally built into China’s unfair trade practices. There is no airtight commitment to protecting intellectual property, ending currency manipulation and granting market access. The PRC will neither curb subsidies and state support for national champions of industry nor pursue market liberalization. Not in phase one, and not anytime soon.

But these sins of omission are, for now, less to fear than one potential sin of future commission. That is, national security professionals fret about Trump acceding to China’s demands to allow Huawei and other Chinese high-technology firms to gain access to the U.S. market.

Questions Mount

Bloomberg reports Trump’s China Deal Yields Plenty of Questions, and Critics

With the partial agreement with China that he announced Friday, President Donald Trump is back in dealmaker mode after months of escalation.

That doesn’t mean, though, that the new grand bargain that Trump once promised with China is any more than a small step closer to reality, or that a curtain is being drawn on the uncertainty his trade wars have brought to the global economy.

It also leaves a gnawing question hanging over Trump and the economic fallout from his assault on China and global supply chains as he prepares to face the electorate in 2020: Has it really all been worth it?

“This deal hardly resolves any of the major underlying sources of trade and economic frictions between the two countries,” said Eswar Prasad, a former head of the International Monetary Fund’s China team now at Cornell University.

“There’s justified skepticism about whether even a mini-deal will get done. Officials said it will take three to five weeks to finalize the details. Past negotiations have broken down in less time than that,” said Tom Orlik and Yelena Shulyatyeva, at Bloomberg Economics.

I’m skeptical that there is anything that could be objectively called a deal,” said Scott Kennedy, an expert on the U.S.-China economic relationship at the Center for Strategic and International Studies in Washington.

Announcement, Not a Deal

That's why I called it an "announcement" and not a "deal" in Trump's No Meat on the Bones Trade Announcement With China

Every announcement of this sort has fallen through for a year. Maybe this one will succeed. But China has not confirmed what Trump claims.

If China does buy the agricultural products that Trump claims, China would have have done so anyway.

Question of the Day

Q. Assume this "deal" actually gets ink. What do you have?

A. Stalemate

Trump backed down from his demand for a comprehensive deal.

All of the difficult questions have been postponed as were the Trump's most recent tariff threats.

By hey, it's the greatest stalemate in history.

Mike "Mish" Shedlock