The confusing phase one preliminary trade deal between China and the United States will be a "flawed" and "ridiculous effort" that won't solve the underlying problems that provoked president Donald Trump into launching his trade war against China.
Phase one is intended to pave the way for a more comprehensive trade deal to mitigate -- but not end -- Trump's trade war. It was to have been signed-in December but is now tentatively scheduled to be signed any time during the first three months of 2020. The delay is due to lingering disagreements over basic U.S. demands and China's stubborn insistence Trump must rescind some tariffs for phase one to be signed.
Economist Stephen Roach PH.D., senior lecturer at Yale University's Jackson Institute, said phase one will be more of a political win for Trump, who is currently plagued by an impeachment inquiry that will see his impeachment by the House of Representatives before Christmas. Phase one will also be a "pretty hollow deal," according to Roach.
"It's politically expedient, especially for (Trump) who's feeling a a lot of political pressures for other reasons at home," said Roach, who also the former chairman of investment bank Morgan Stanley Asia. "But it's very flawed in that it focuses on a bilateral fix, operating on the U.S.-China bilateral deficit to address America's multilateral trade imbalances with 102 countries."
Roach was with Morgan Stanley for more than 30 years and was chairman of Morgan Stanley Asia and chief economist at Morgan Stanley in this period. He also said phase one "is a ridiculous effort to fix a trade problem and it doesn't address any of the structural issues that the U.S. was so adamant about (addressing) in launching the tariffs over a year-and-a-half ago," he told CNBC.
Roach's pessimism stands in stark contrast to the illusory optimism of Trump, who continues to praise phase one as a very substantial deal. White House economic adviser Larry Kudlow is also under the illusion the U.S. and China are close to a deal.
In contrast, the U.S. Chamber of Commerce has publicly said U.S. and Chinese negotiators might not be able to finalize phase one before Trump's new tariffs are levied on Chinese goods by December 15.
China remains pessimistic phase one will be signed this year. The mood in Beijing about the prospects of phase one this year remains pessimistic, according to CNBC. China also claims external rumors around the trade talks are inaccurate. It was referring to reports U.S. trade officials were invited to China to take part in fresh negotiations.
