Trade war: armistice or ceasefire?

Chart of the week

It’s done. Almost two years after the start of the trade war, the United States and China signed a partial trade agreement on 15 January.

The 96-page agreement, available on the website of the Office of the U.S. Trade Representative [1], includes several parts, the most concrete of which is China’s commitment to increase its imports of U.S. goods and services by $200 billion in two years from their 2017 level.

The breakdown of purchases includes an increase in imports of manufactured goods (USD 78 billion), energy (USD 52 billion), services (USD 38 billion) and agricultural products (USD 32 billion).

Our analyse

The increase in Chinese imports from the United States sought by the agreement corresponds to an almost doubling of Chinese imports from the United States in a very short period of time, raising the question of the credibility of such an objective. Observers agree that it is achievable but that it will not be easy.

The fulfilment of this promise is therefore questionable (as are the others) and the two countries could then resume hostilities. All the more so as the second phase of the negotiations could prove delicate, dealing with certain sensitive subjects such as public subsidies to Chinese companies.

That said, before the next figures and the start of the second phase of the negotiations, the risk of a further escalation of tensions has diminished, as the timetable is still uncertain. This reduction in trade uncertainties should contribute to an improvement in the situation in the manufacturing sector over the coming months, the main area of weakness in the world economy.

[1] https://ustr.gov/sites/default/files/files/agreements/phase%20one%20agreement/Economic_And_Trade_Agreement_Between_The_United_States_And_China_Text.pdf

 

See also :

United States trade deficit falls sharply

The opinion expressed above is dated 16 January 2020, and liable to change.

This document is not pre-contractual or contractual in nature. It is provided for information purposes. The analyses and descriptions contained in this document shall not be interpreted as being advice or recommendations on the part of Lazard Frères Gestion SAS. This document does not constitute an offer or invitation to purchase or sell, nor an encouragement to invest. This document is the intellectual property of Lazard Frères Gestion SAS. LAZARD FRERES GESTION – a simplified joint stock company with share capital of €14,487,500 – Paris Trade and Companies Registry No. 352 213 599. 25, RUE DE COURCELLES – 75008 PARIS, FRANCE


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Julien-Pierre Nouen

Directeur des études économiques et de la gestion diversifiée