U.S. exports to China of manufacturing, agriculture, energy and services will total a combined $57B this year, a fraction of what was stipulated in the phase one agreement both countries signed in January, report finds.
The U.S. and China are dependent on each other, said Peter Petri, a professor of international finance at the Brandeis International Business School. “The economic rationale for improved trade relations has never been stronger. Both countries need it to reverse steep declines in their economies,” he said.
Kirkegaard said the White House has limited leverage forcing China to make good on its commitments, since American businesses might not even be able to fulfill them. “On the U.S. side, there is a supply bottleneck,” he said. American manufacturing, technology and professional services companies have a lot riding on the continuance of the phase one deal’s intellectual property protections. “U.S. companies have enormous amounts of IP and other technology, trade secrets and the like, that they seek to protect. If this phase one agreement actually moves forward and is able to be fleshed out, then U.S. companies, including our clients, would benefit,” Pinkert said.
“That part of the food chain is an example where it’s really a combination of factors coming into play. The virus really hit hard in the big plants in the U.S. and has cut down operations generally,” said Harry Broadman, managing director at Berkeley Research Group. “That, to me, epitomizes the problem this agreement has faced as a result of the pandemic.”
Retaliatory tariffs effectively closed the China market to U.S. wheat exports in 2018 — but the phase one deal has opened up $100 million in wheat exports.
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