Everything is ready for the heading of Phase 1 of the trade agreement between the United States and China. An approach that is not without pitfalls that culminated on December 13 despite the tensions between the two largest economies in the world are far from perishing.
US President Donald Trump plans to sign the first part of the plan today at a ceremony in which Beijing will be represented by the Chinese Deputy Prime Minister, Liu he, architect with the US commercial representative, Robert Lighthizer, of the project.
Waiting for the meeting between the two leaders, Wall Street records on the eve a new historical maximum in the Dow Jones, although the S&P 500 and the Nasdaq 100 recede slightly.
The first phase of the long road that ended the commercial war instigated two years ago by the White House revolves around two essential factors. On the one hand, Washington's commitment to cancel 15% tariffs on Chinese consumer products worth more than 150,000 million dollars that were planned for last December 15, and reduce from 15% to 7.5% those applied at the beginning of September on goods of the Asian country by 112,000 million dollars.
In return, Xi Jinping's government will increase purchases of US products up to at least 200,000 million dollars in the next two years. According to the latest information leaked by the US media, an increase of $ 75,000 million in manufactures, $ 50,000 million in energy, $ 40,000 million in agricultural goods and $ 35,000 million in services is expected.
These figures will eventually achieve one of Trump's main goals, which is reduce the annual trade gap of almost 300,000 million dollars between both countries.
That said, experts familiar with the Asian giant continue to be skeptical about Beijing's ability to absorb such amounts of US goods without threatening commercial ties with other suppliers.
Phase 2 negotiations are scheduled to begin immediately, although they will not accelerate until after the 2020 presidential elections
“Assuming that China does not increase its global import capacity, the list of purchases between the US and China implies that additional purchases by Beijing will be at the expense of other economiesfor example, Brazil and Uruguay in agriculture, Europe and Japan in cars or Russia and Australia in energy, “explains César Rojas, economist at Citi.
For its part, the US will be able to increase shipments to China of most of these goods although it may have to increase soybean production, bodies and parts of cars, aircraft, liquid natural gas and LED lamps.
Beyond the commercial implications, the two largest economies in the world take some steps to protect intellectual property, stop forced transfers of technology and ensure transparency in the exchange market. It is significant that the Treasury Department remove China from the list of currency manipulators.
The decision of both countries to review the progress of their commercial relations every six months notes that the mechanism for applying these obligations is uncertain.
The stock market continues in free rise
Wall Street has renewed the historical highs of the Dow Jones for the fourth time so far this year, although the index has failed to exceed 29,000 points at the end, which it has touched throughout the session. Instead, the Nasdaq 100 has remained above 9,000 points, which surpassed for the first time on Monday.
Thus, since the beginning of rally Christmas around the first day of December, the S&P 500 has revalued about a 5%, while Dow Jones has advanced 3.5% and Nasdaq 100, 8%.
The volatility He marked his lowest level in 2020 on Tuesday: 12.3 points. An unequivocal signal that the dead calm It has been installed on Wall Street before the signing of the agreement.
To put it in context, it should be remembered that the volatility index of the Chicago Stock Exchange (Vix) registered in November the lowest volatility figure of the last year at 11.54 points and that, for example, during the stock market correction of Christmas Eve of 2018 it reached 36.07 points, in a climate of much more tension.
Matters pending resolution
Tensions between the US and China go beyond trade. Matters like HuaweThe limitations imposed on exports of US components are matters included in the national security agenda that, for now, remain untreated.
It is also significant how Washington will continue to value more than half of the imports it receives from the Asian country. Phase 2 negotiations are scheduled to begin immediately, although they will not accelerate until after presidential election from 2020, which implies that the charges will not disappear throughout the year, unless new order.
China and the US agree to resolve relevant issues of the phase one of the trade agreement, but do not give details