So let's look forward on this deal. To be the economist: it depends. Follow me a second. 1) China is buying time. That's it. They basically got just above nothing in return. Average tariffs on Chinese goods dropping from 21% to 19%. That's just above nothing for Beijing. 1/n
2) China however is motivated to resume normal trade flows with the US. This implies we will see them try and satisfice the White House in living up to the deal. This doesn't mean they're going to hit everything but they are going to try hard to be good enough IMHO 2/n
3) Whys China motivated here? Because their economy is crap, they're short USD, and they know they can't run large surpluses with the rest of the world the way they do the US without triggering a lot of secondary problems. Also, (and circling back to why they're buying time) 3/n
'They are really hoping for a Biden Presidency to get some of that South China Sea lovin they got earlier. Look the other way. Ignore it. No problem. If they've been good this year, Biden wins, they figure they got a shot at killing this whole thing. 4/n
4) On the US side, yes, I think it is fair to say electoral politics figured in the calculus here but it definitely was not prioritized above either the substance or the form of the deal. Here is what I mean by that. China is a centrally planned economy. Let's not pretend 5/n
otherwise on that. So assume Trump gets Beijing to agree to the greatest, most astounding, market liberalizing and access deal EVER. Does it mean anything? Based upon a whole series of "deals" with proper wording struck with Beijing before and the fact that all kinds of 6/n
Freedoms are detailed in the Chinese constitution which are ignored in reality, one would have to say no it wouldn't mean anything. The purchase agreements are clearly used as observed and verifiable confirmation of Chinese behavior. Yes, those help constituents. That's it 7/n
5) What is odd about this whole conversation is that everyone talks (Trump administration and critics) about this enormous demand but in reality, these demands are very reasonable, straight forward, and easy to meet if China wants to meet them. That's really the crux. 8/n
Does China want to meet these demands? Fundamentally, I say no or at least until they find an out. 6) Why can't they meet them? Their economy is under enormous pressure. They have a specific target for a trade surplus they need to hit because of ongoing leakages. That means 9/n
They can't structurally raise import levels (i.e. more US imports without displacing other countries) that means they will continue substituting away from all nature of foreign products which we already see. This means they will have to make up the decline in the US trade 10/n
Surplus by increasing its trade surplus with other countries, something we've already seen in 2019. In short, they do not have a lot of good options to keep the plates spinning. So is this a truce? Depends.
