Larry Kudlow took to cable news yesterday to reassure the American public and investors ahead of talks with Beijing next week that China continues to meet "all the obligations" of the 'Phase 1' trade deal, insisting that "the one area we are engaging in [with China] is trade". A week earlier, he desperately insisted that the deal was still intact.
This, despite research from Goldman Sachs (and others) who have shown that China has so far made little effort to keep its promise to buy billions of dollars in via controlled-economy direct orders of American goods.
That chart is a month old, but the trend it illustrates hasn't changed: as of Wednesday, Beijing has purchased only a quarter of the goods it promised to buy. China would need to buy about $130 billion during H2 of this year to comply with the original terms of the agreement signed in January, which laid out purchasing an additional $200 billion of US goods and services over the 2017 level by the end of 2021.
A week ago, one Twitter user stumbled on something interesting: Is the Trump Administration taking aim at TikTok and WeChat simply to give Beijing one more reason to at least play along with the notion that the 'Phase 1' trade deal was anything more than a publicity stunt.
🇺🇸 🇨🇳 In a context where U.S. officials are unlikely to recognize that #Phaseone" agreement is a major fail, they're focusing on other moves to add pressure on #China (#Finance, #Tech, #Taiwan)https://t.co/xFU6ZklfbU— Christophe Barraud🛢 (@C_Barraud) August 7, 2020
Now, that conjecture is looking surprisingly prescient, as top trade officials in Beijing are reportedly pushing to add TikTok and WeChat to the agenda with their American counterparts next week (the talks are part of a six-month review mandated as part of the deal). Here's more from Bloomberg:
A virtual meeting will likely take place as soon as this week though a date hasn’t been finalized, according to people familiar with preparations for the talks who asked not to be named. Along with agricultural purchases and the dollar-yuan exchange rate, which are among topics to be discussed, Chinese officials intend to bring up President Donald Trump’s prospective bans on transactions with the two apps on national security grounds, the people said. They did not elaborate on what China hopes to achieve on these issues.
Remember, the US targeting TikTok could potentially disrupt how Chinese communicate with family and friends abroad (Tencent-owned WeChat is a critical venue for communication between the people of the world's 2 largest economies, as well as creating problems for Chinese citizens on the mainland who own Apple devices.
So in a couple of weeks, when the realization finally lands that the trade deal is dead, Trump can announce a new 'deal' to avert the planned bans on WeChat and TikTok.