We certainly do not claim to be trade experts, but here goes: our thoughts on the “phase 1” trade deal. In a nutshell: it’s easy to over-commit, but hard to follow through. Take the headline number of China striving to buy an additional $200 billion in US agricultural, energy and manufacturing products and services – so soybeans, LNG and crude, Boeing airplanes and Wall Street fees – over a period of two years. US exports of goods and services to China were worth $188 billion annually on the eve of the trade war. Can the US really ramp up production to meet the demands it has laid at Beijing’s doorstep? The answer is a clear-cut no, unless US exports of goods and services to the rest of the world are diverted to China. In that case, there will be a shift in bilateral trade balances, but not in the overall US trade deficit. In other words, if the Chinese do stump the $200 billion for the purchases, the overall economic effect will be negligible.

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