As we noted earlier, Secretary Mnuchin was clearly dealing with some serious stress last night as President Trump stormed about the possibility of cancelling the US-China trade pact, fuming about the uncertainty surrounding whether China plans to honor the agreement.
As the bilateral relationship deteriorates to its most caustic point since Nixon met Mao, Bloomberg reports that Chinese and US trade negotiators will speak as soon as next week on progress in implementing a phase-one deal after Trump threatened to "terminate" the agreement if Beijing didn't move to swiftly adhere to its terms.
The news was broken at around 330ameT, overnight in the US, but mid-afternoon in China. It comes as Beijing once again threatens to dump its Treasury holdings, a threat that carries added weight as US borrowing soars.
The 'virtual' meeting will feature all the key players: Chinese Vice Premier Liu and Robert Lighthizer - the respective head negotiators for their countries - will both be on the call.
The planned phone call will be the first time Liu and Lighthizer speak officially since it was signed in January, just before the global coronavirus pandemic hit the world’s two biggest economies and upended global supply chains. The deal calls for the two representatives to meet every six months; the upcoming call will be held slightly ahead of schedule.
Trump also seemed to suggest a mysterious new development might be on the horizon when he told reporters at the White House on Wednesday that he’d have a report in the next week or two about how the agreement was doing.
On Sunday, in response to a question at a town hall from a business owner who said he was losing money on the tariffs, Trump noted that the duties prompted China to promise to buy $250 billion worth of American goods.
"Now they have to buy," the president said. "And if they don’t buy, we’ll terminate the deal, very simple."
According to the text of the agreement signed earlier this year, China has agreed to buy an additional $200 billion in US goods and services - compared with the 2017 level - over the next 2 years, using Soviet-era centrally-planned purchases.
As we've noted, so far, purchases have lagged well behind where they should be to reach the first year target of a $76.7 billion increase. Given that the imports in 2019 were still well below the level from 2 years prior. In April, even with China gobbling up all the PPE and other vital supplies, exports to the US were well above what economists expected, suggesting that the American trade deficit with China will likely worsen in the coming months.
- Chinese Exports YY* (Apr) 3.5% vs. Exp. -15.7% (Prev. -6.6%)
- Chinese Imports YY* (Apr) -14.2% vs. Exp. -11.2% (Prev. -0.9%, Rev. -1.0%)
But given the recent frostiness in the US-China dialogue, we wouldn't be surprised to see the US effectively sabotage the deal, upping the stakes and nudging the US toward the China hawks' "decoupling" dream.