NBC News | By Martha C. White | May 12, 2020
China’s commitment to purchase $200 billion in U.S. exports by the end of 2021 has been badly sidelined by the dual supply-and-demand shock delivered by the coronavirus.
U.S. exports to China of manufacturing, agriculture, energy and services will only total a combined $57 billion this year, a fraction of what was stipulated in the phase one agreement both countries signed in January, according to a report by the Center for Strategic and International Studies.
“In light of what is going on right now, I think it’s important to recognize the impact that the crisis has had on the ability to meet those commitments,” said Dean Pinkert, senior counsel at the law firm of Hughes Hubbard & Reed and a former commissioner with the International Trade Commission.
Increasingly harsh rhetoric from Washington and Beijing has inflamed tensions between the two sides at the worst possible time. On Monday, White House trade adviser Peter Navarro said China should pay for its role in spreading the coronavirus.
“A bill has to come due for China,” Navarro told CNBC. “They inflicted tremendous damage on the world which is still ongoing.”
Navarro didn’t rule out advising President Donald Trump to impose new tariffs or to walk away from the hard-fought phase one deal that capped a bitter 18-month battle between the world’s two largest economies and roiled markets.
Trump said later Monday he had no plans to revisit the agreement, although a few days earlier he said he was “very torn” about preserving it.
Last week, Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin agreed via conference call to move forward with phase one “in spite of the current global health emergency,” and to continue to meet regularly, according to a statement from Lighthizer’s office.
Experts say escalating a trade war in a pandemic would be a terrible idea.
The U.S. and China are dependent on each other, said Peter Petri, a professor of international finance at the Brandeis International Business School. “The economic rationale for improved trade relations has never been stronger. Both countries need it to reverse steep declines in their economies,” he said.
According to CSIS, U.S. exports to China were expected to rise by roughly 37 percent in the first quarter of 2020 on a year-over-year basis. Instead, they fell by 10 percent.
“The U.S. export numbers they signed up for a few months ago are very much out of whack with economic reality in China,” said Jacob Kirkegaard, senior fellow at the Peterson Institute for International Economics.
Kirkegaard said the White House has limited leverage forcing China to make good on its commitments, since American businesses might not even be able to fulfill them. “On the U.S. side, there is a supply bottleneck,” he said.
CSIS found that manufacturing exports cratered, led by a remarkable 47 percent drop in vehicle exports — the result of American automakers shutting down operations combined with little Chinese demand. Demand for aircraft, another key U.S. export, also vanished. “That’s one of those areas where China could say to the U.S., look, there’s no demand. What is the White House going to do about that?” Kirkegaard said. “The inconsistency in this deal is just all the more obvious now.”