The recent US China trade agreement we reported earlier is to be instigated in July. These initial actions should cut the US trade deficit with China. America’s trade deficit with China was almost $350 billion last year. However, there are still uncertainties regarding the detail of the deal. These relate particularly to its financial aspects.
As we reported earlier on Market.biz, the meeting between President Trump and Chinese President Xi Jinping was more relaxed and a lot friendlier that had been expected. The two leaders seemed to get along much easier than many hoped. The result of that meeting was 100 days of discussions about trade from that date.
July 16 is the date by which US card payment services would be able to commence licensing applications for their use in China. This is an area of China’s finance where the Chinese UnionPay system has a virtual monopoly – until now. The competition will probably be unwelcome to UnionPay but it could, and should, lead to a better deal for Chinese cardholders.
American beef will be permitted to be imported into China from July 16 at latest. The US will issue a proposed rule for the importation of Chinese cooked chicken to be made available for sale on American markets. Other terms of the US China trade agreement have been outlined in our report of May 12.
The feared US -China trade war between the two seems to have been averted by this US China trade deal. President Trump had made it clear when campaigning for the presidency that the US would cease trading with China if the trade seemed to be ‘unfair’ to the US.’
This tough statement may have nudged China into this deal – or it may have forced Trump into agreeing with it. Till now, it appears as though it is a deal from which both partners to it appear to expect to benefit from it. Benefit from it in their own ways!
After the initial elation that this US China trade deal kindled, it soon became apparent that its benefits were tenuous at best. How would it result in an increase in trade between the two countries? Are these genuine opportunities for American finance firms and beef farmers to get a foothold in China? Or is it all just talk and politics?
China had banned the importation of American beef in 2003 due to fears of BSE (bovine spongiform encephalopathy.) Although the ban was lifted in 2016, few Chinese have purchased American beef since then. Will they buy it now? Will the Chinese switch from their own to an American credit card? Who can say!
This is fundamentally an update of our last New Report on the US China trade deal agreement. The various agreements made seem to be proceeding, although Visa and MasterCard have not yet been cleared to operate in China. Nevertheless, it is heartening that the US and China can agree on anything!
This is a good opportunity for the US and China to form alliances on a number of world issues – the North Korea situation would be a good start.
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