The Phase One deal between the U.S. and China has been done. But trade deficits emerge gloomily on the horizon. Additional tariffs scheduled for Dec 15 have been scrapped, though rising debts still continue to threaten the economies.
China’s imports from the U.S. have come down in the first ten months of 2019 by 14.7 percent. This amounts to $87.6 billion. However, the U.S. imports from China have gone up by four times at $382.1 billion.
China has promised to purchase more farm products from the U.S. However, American trade deficits will continue to loom large, even if China increases its imports by $200 billion from Washington.
The real value of the agreement made between the two counties has to be watched. The trade agreement is expected to play a prominent role in the presidential elections next year, as it means that the Trump administration has bagged a major victory. Trade talks have resulted in blocking the additional tariffs that were targeted between the two countries.
Beijing has stated that the Phase One deal has been positive, which was able to bring back investor confidence and reduce market uncertainty. China was able to provide some positive data for the month of November as retail sales have gone up by 8 percent and industrial output is better than expected with a 6.2 percent increase. However, fixed-asset investment has grown at just 5.2 percent which is the slowest since 1998.
The trade deal caused a lot of optimism in the markets all over the world, as investors celebrated the negotiated deal with a positive attitude. But Monday was relatively calm in the markets.
Further trade talks are expected early next year between the U.S. and China. Capital spending has come down with the tariffs creating insecurity for corporate spending. Uncertainty still continues to harm both economies as policymakers will have to bring in policy stability.
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