Mnuchin: No material impact from coronavirus on US-China trade deal — for now: Finance officials from world’s 20 largest economies said they would keep a close watch on the fast-spreading outbreak

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by NineteenEighty9

> China was focused on the virus for now, he said, but Washington still expected Beijing to live up to its commitments to buy more U.S. products and services under the trade deal.

> “I don’t expect that this will have any ramifications on Phase 1. Based on everything that we know, and where the virus is now, I don’t expect that it’s going to be material,” he said.

IMO this is going to get interesting if the central government in Beijing isn’t able to get the economy moving again, and fast. A report came out the other day stating almost a million Chinese firms will be insolvent within 2 months (representing 60% of employment) if things don’t normalize. With an overall debt load approaching 320% of GDP the PBOC has limited policy options. IMO the phase one deal is dead and phase two will be a non starter at this point.

The phase 1 trade deal was essentially full capitulation by China, no tariff relief, they really got nothing. The real power dynamic between US/China has always been unbalanced (heavily in US favour) and the phase 1 trade deal brought that to the surface, with China essentially being strong armed into purchasing more American goods and getting very little in return. The US government continues to escalate on other fronts, it announced recently its looking to ban exports of high end US tech to China. With the outbreak it’s unlikely they’ll be able to follow through on all these large scale purchases agreed to in phase 1, so you’ve seen China lower tariffs on hundreds of American products as a way to appease the Trump administration. But that’ll only work temporarily.

TL;DR: it’s going to be interesting if they can’t get this under control fast. Phase 1 deal is dead in my opinion, phase 2 will likely be a non starter unless this outbreak is contained within a relatively short period of time.


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