China got off to a weak start during the first month of the “Phase 1” trade deal that it signed with Trump in early January. What is the “Phase 1” trade deal? In exchange for China’s promise to dramatically increase its purchase of a wide range of American goods, Trump delayed the implementation of the next large round of tariffs on Chinese imports. The agreement uses China’s purchases in 2017 as a baseline. Here’s the goals that were established: Phase 1 China Trade Deal Goals.
In January, China didn’t even come close to matching the 2017 baseline in any of the four categories of products, much less the goals to boost their imports. In February, instead of increasing their imports to begin to catch up, their imports in three of the four categories fell even further. (Their imports of manufactured goods increased slightly, but was still well below the 2017 baseline.) Here’s the February results: Phase 1 China Trade Deal 2020 YTD.
Of course, China was dealing with the Covid-19 outbreak at this time, so some might say we should cut them some slack. Yes, they were dealing with that crisis, but only in Hubei province, in which the city of Wuhan is located. And crisis or no crisis, people still have to eat. Yet their imports of agriculture products fell in February from the already-low January figure.
Only two months in, it’s becoming clear that the Chinese are ignoring the terms of this trade deal. They’ve already gotten what they wanted – a halt to the increase in tariffs, they are back in control of the trade situation, and they can hope once again that America will take its eye off the ball as it has always done with trade deals.
If I were Trump, I’d wait until the March results are posted in early June. Then I’d give them a stern warning that if they don’t improve their performance within the next three months, the deal will be off and I’d raise the tariffs beyond those that were delayed by the January signing of this ill-conceived deal. And I would cease any further pointless trade negotiations with China.