Thread by @Brad_Setser

So the first phase of the Phase 1 deal is that the US rolls back the 15% tariff to 7.5% in return for basically the agricultural purchases China has already been doing + going back to normal on 'beans after the US harvest?

1/x

wsj.com/articles/us-ch…

And then China delivers more (how much more is undefined) ag purchases + energy purchases + manufactures purchases (presumably an aircraft order, plus also rollback of auto tariffs) next year for further US tariff reductions (on the $200b list? or on the first $50b too?)

2/x

Feels like the expected purchases for tariff relief deal, dressed up with the IPR reforms China is already implemented and a reiteration of China's existing G-20 language on currency ...

3/x

That's not exactly a revolutionary deal, though it does reduce the threat of escalation that worried the market and scales back the tax on US consumers associated with the initial rounds of tariffs.

4/x

In the long-run, though, the most significant aspect of the Phase 1 deal may not the tariff rate reductions, but rather the tariffs that remain on $350b of Sino-American trade pending a Phase 2 deal that may never happen ...

5/x

Quote is from an article by @petersgoodman about Britain's decision to pull back from the deep integration provided by the EU and its single market. 7.5/12.5/25 tariffs on ~ 2/3rds of trade between the US and China would be a similar step back.

6/6

nytimes.com/2019/12/13/bus…