The U.S.-China 'Phase 1' trade deal signed by U.S. President Donald Trump and Chinese Premier Xi Jinping on 15 January 2020 is a failure.
That is the assessment of analysts and Biden administration trade officials, who point to the failure of Chinese officials to live up to their part of the agreement. The deal had required China to boost its purchases of U.S.-produced goods and services by $200 billion over two years. The following excerpt describes how far China fell short according to their analysis:
An analysis of final 2021 Census trade data compiled by economist Chad Bown of the Peterson Institute for International Economics showed China met just 57% of its full two-year goods and services targets.
Beijing’s purchases of the goods, energy and services targeted in the Phase 1 agreement were not even enough to return to China’s baseline 2017 level of purchases of U.S. imports after retaliatory tariffs had eroded them in 2018 and 2019, he said.
"Put differently, China bought none of the additional $200 billion of exports Trump’s deal had promised," Bown said in his analysis here....
Deputy U.S. Trade Representative Sarah Bianchi said last week it was "really clear that the Chinese haven't met their commitment in Phase 1" and the Biden administration was working with Chinese officials here to address the matter.
Political Calculations has tracked the outcome of the 'Phase 1' trade deal between the U.S. and China from the beginning, so we have some insight into the shortfall. As part of that analysis, we created a counterfactual, or rather, a projection of how trade between the U.S. and China would be expected to grow after the deal was struck.
But that projection ignored any contribution that might come from the additional $200 billion worth of U.S.-produced goods and services that Chinese officials committed to buy over the next two years.
Had everything gone as negotiated, that counterfactual projection would have provided an easy way to measure how much more growth in the value of goods and services traded between the two nations had occurred as a result of the agreement. But in reality, the onset of the coronavirus pandemic in China meant it became our primary means to directly measure the impact of the pandemic on trade between the U.S. and China. Here's the final update to our chart in which we've tracked that evolution.
Collectively, we find the cumulative net loss of trade attributable to the coronavirus pandemic from January 2020 through December 2021 is $176 billion, which is visualized as the gap between the heavy black line and the dashed red line representing what instead became a "no coronavirus pandemic" counterfactual.
If China had met its 'Phase 1' trade deal obligations to purchase an additional $200 billion more U.S.-produced manufacturing, agricultural, and energy goods and services beyond the deal's baseline, we would instead have seen the heavy black line rise above the dashed red line before December 2021. That it generally parallels it while remaining consistently well below it confirms Bown's assessment. December 2021 marked the last month of China's obligation to make its 'Phase 1' trade deal purchases of additional U.S.-produced goods and services, so that door has now closed.
While the preceding analysis confirms China failed to meet its obligation, that failure is jointly shared with the Trump and Biden administrations, who could have done more to press for the success of the deal. That's especially true of the Biden administration, which both bought into the former president's trade strategy and benefited from strongly recovering economies in both China and the U.S. during its first year in office, but whose actions to press the Chinese to comply with their obligations under the deal have proven ineffectual.
References
Lawder, David. U.S. December trade data reveals massive shortfall in China's 'Phase 1' purchases. Reuters. 8 February 2022.
Lawder, David and Shalai, Andrea. U.S. trade official says China failed to meet 'Phase 1' commitments. Reuters. 1 February 2022.
U.S. Census Bureau. Trade in Goods with China. Last updated: 8 February 2022. Accessed 8 February 2022.
Previously on Political Calculations
Here is all the analysis we've presented in chronological order, starting from Month 0, when the 'Phase 1' trade deal between the U.S. and China was struck, all the way through December 2021, which marks the end of our coverage.
- January 2020 Snapshot of U.S.-China Trade
- Coronavirus Explodes Trade Recession Between U.S.-China
- March 2020 Snapshot of U.S.-China Trade
- U.S. Exports to China Jump After China Reopens Economy
- U.S.-China Trade Data Shows Start Of Coronavirus Recession Recovery
- U.S.-China Trade Recovery Stalls in June 2020
- China, U.S. Take Positive Steps in Trade Between Countries
- Surge in U.S. Farm Exports to China Puts Bottom in Coronavirus Trade Impact
- US-China Trade Growth Signals Coronavirus Recession Recovery
- U.S.-China Trade Soared Above Pandemic Recession Levels in October 2020
- Tracking U.S.-China Trade Through the Coronavirus Pandemic
- U.S.-China Trade Surged in December 2020
- How Much Time Did the Coronavirus Pandemic Cost in U.S.-China Trade?
- One Year of the Coronavirus Pandemic and U.S.-China Trade
- How Much Has the Coronavirus Pandemic Shrunk U.S.-China Trade?
- U.S.-China Trade Recovery Slows to Near Stall in May 2021
- U.S.-China Trade Growth Slows Further in July 2021
- COVID and Contraction in China, Southeast Asia
- Shrinking Imports Confirm Negative Developments for China's Economy
- U.S.-China Trade and Inflation
- U.S.-China Trade Spikes Up on U.S. Soybean Exports
- Soybean Exports, Inflation Boost U.S.-China Trade in November 2021
- Closing the Door on the U.S-China 'Phase 1' Trade Deal
Labels: trade
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