China Deal Impact

PUBLISHED: 10:15 PM 21 May 2018

China Trade Agreement Sends Market Soaring

There are still a number of details to work out, but a major sale has been announced.

The Chinese government worked with the American government in an attempt to avoid an expensive tariff, and it seems like the mere suggestion that the deal worked out was enough to buoy the market by several hundred points.

In one of his most controversial choices since becoming president, Donald J. Trump planned to put into effect tariffs of up to 25 percent on a number of products from China, including commonly used metals.

However, rather than suffer a loss of income, the Chinese government decided to negotiate with the Trump administration (to the democrats eternal dismay). Talk of the new trade deal that arose from these negotiations has not just helped to avert fears of an increase in prices for many goods, but also buoyed the market, all on the basis of the CHANCE of a deal between the American and Chinese governments. Seems that the president really is the expert negotiator he was portrayed as.

This morning, President Donald Trump unveiled a new trade deal with the Chinese government, one that not only projects power, but also will help businesses in the United States to profit.

According to the president and Treasury Secretary Steve Mnuchin, the agreement is still being negotiated. However, the plan, as it currently stands, already sounds like a win for the country.

The first thing the president said is that as part of the negotiations, China promised to buy more farm and agricultural supplies from the United States, including crops like soybeans.

Mnuchin told Fox News that the Chinese agreed to increase purchases of American agricultural and farm products by as much as 40 percent over the next twelve months.

According to Wilbur Ross, the Secretary of the Department of Commerce, the governments of China and America will work out the exact increase as the negotiations proceed.

They also said that the Chinese government had agreed to help to “substantially” reduce the trade deficit between the United States and the Chinese governments.

Currently, the United States runs about a $375 billion trade deficit with China. That means that, in total, they make $375 billion more from trade between our two nations than we do. Chinese officials have promised that they will help us to get closer to parity when it comes to trade.

They could have done this by saying that they would rather export fewer Chinese goods to the United States, but instead they promised to import more American goods.

The Chinese even promised that they would do something about ‘intellectual property’ issues that have been of great concern for years.

According to Steve Mnuchin, they also talked about the possibility of overhauling some of China’s trade policies and practices.

In exchange for these (and possibly more) concessions, the United States simply had to promise that they would drop the 25 percent tariff that they threatened earlier this year, which would have impacted around $150 BILLION worth of goods imported into the United States each year, at the very least.

But Derek Scissors, who works as a scholar at the American Enterprise Institute and has been an advisor to the president in the past, had a different take.

He said that the vague claims were not encouraging, and that Mnuchin was “perfectly imitating former Treasury Secretaries Lew, Geithner, and Paulson,” all of whom led the United States here.

There are a few things about the deal, thus far, that could be better.

First, it would be nice to see the Chinese government make some solid promises about how they are going to improve the intellectual property situation.

China is one of the leading places on Earth for intellectual property theft. The country produces all sorts of fake versions of trademarked products, from movies, video games, and even cigarettes, to more complex items like purses and consumer electronics.

If the Chinese government would cut down on the ‘knockoff’ products that the country regularly produces, it would mean millions of dollars more for businesses.

However, the negotiation is still not over, so while the market may be surging upwards (more the 360 points up before noon), it could still climb higher as the deal firms up and negotiations come to a (hopefully successful) conclusion.

However, even if negotiations end with what they’ve promised thus far, the United States is still coming out far better off than they were before.

As for the tariffs, they are not permanently discarded. According to the current negotiations, they are simply ‘suspended.’ That means that if the Chinese government does not live up to their end of the deal, the tariffs on more than $150 BILLION of Chinese products will be restored.

It’s hard to tell how the deal will end up, given the propensity of the Chinese government to make deals that they don’t intend to keep (like the Paris Accords, for example). However, if America gets even a few of the concessions currently promised by the government of the largest population on Earth, the country will be much better off.