China Phase 1 Purchase Commitments for Goods Only 60% of Promised
With new data out about exports to China, economist Chad Bown of the Peterson Institute for International Economics says that China only bought 60% of the goods it promised, and about 57% of all it promised, when services are included. In all, China said it would buy $502.4 billion from U.S. sources in 2020 and 2021.
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The administration has said it cannot lift any of the tariffs because China is not meeting enough of its commitments (see 2201200007), so it's not clear how the trade war could moderate or end.
Bown told reporters on a call discussing his analysis, "I don’t know how they’re going to handle this." He added, "In my view, extending it or giving China more time, I don’t think really is the right approach."
The phase one deal proposed that China would return to its pre-trade-war level of imports of American goods and services, and then add $200 billion in imports across two years. Instead, it fell $13.6 billion short of the 2017 baseline. Bown said that in agriculture, which was the most political segment of the deal, China did surpass the 2017 purchase levels. Then, they bought $20.9 billion worth of food and fiber; in 2021, they bought $33.8 billion worth.
Bown said there isn't good data on how investment flows have changed in China due to the trade war, but he expects firms that use China as an export platform to the U.S. are responding to the Section 301 tariffs. By almost four years in, it's starting to look like "the new normal between the United States and China," he said. And, he said, given the level of tension between the U.S. and China, even if some of the tariffs were lifted today, he believes businesses would think they could be hiked again soon.
In his analysis, Bown wrote, "Trump's 'phase one' agreement with his 'very, very good friend' President Xi Jinping was not a total washout. The deal did halt his spiraling trade war. And several of its elements should be kept, notably China's commitments to remove technical barriers to US farm exports, respect intellectual property, and open up its financial services sector."
But, he said during the call with reporters, if the trade war had never happened, and if exports had grown at their historical pace, exports are 19% lower now than they would have been in that timeline. That counterfactual does pretend that the Boeing 737 Max was never grounded, and that the hit to travel and Chinese enrollment in American universities as a result of the pandemic also never happened.