Thread by @C_Barraud

★ A detailed analysis of the 🇺🇸 🇨🇳 #PhaseOne Deal ★

➡ For goods, I used Census Bureau trade data (goods) (bit.ly/2RAtaqd) on U.S. exports to #China and matched them to the list provided in Annex 6.1 (from p.57: bit.ly/3axsY3B).

Categories mentioned in Annex 6.1 point to a relatively limited ❗ set of goods to produce the jump in U.S. (goods) exports (+$63.9B for 2020 and +$98.2B for 2021 compared to 2017 baseline).

In 2017, U.S. exports to #China in the selected categories totalled $78.8B, far less than the $129.8B for total U.S. exports to China, implying that it will be harder for #Beijing to fulfill its promises.

The most interesting point is that 2019 exports to #China for the selected categories should be even lower, namely at $67.8B, based on the hypothesis that Dec. 2019 data would be equal to the average of [Jan.-Nov. 2019].

In this context, the target for 2020 implies a ⬆ of $74.9B from 2019 (+111%❗) while the target for 2021 implies a ⬆ of $109.2B from 2019 (+161%❗)

https://twitter.com/C_Barraud/status/1220725257952202754

Looking at agricultural products, the target for 2020 implies a ⬆ of $19.0B from 2019 (+132%) while the target for 2021 implies a ⬆ of $26.0B from 2019 (+181%).

Based on the total figure (apps.fas.usda.gov/gats/default.a…) for 2017 ($24B), it would imply that AG exports should reach $36.5B in 2020 and $43.5B in 2021. Shanghai-based consultancy JCI (reut.rs/2RmkFAk) suggests that the 2020 target could be reachable (not the 2021).

This is coherent with my first reading ⬇

https://twitter.com/C_Barraud/status/1218100234414383104

Now I have doubts about “#China’s ability to reach its 2020 target (and 2021) in the energy sector. The target for 2020 implies a ⬆ of $22.3B from 2019 (+583%) while the target for 2021 implies a ⬆ of $37.7B from 2019 (+984%).
*⬆/% are calculated using unrounded numbers.

If #China buys at current market conditions, it looks impossible. Now, if China decides to give waivers, uses state orders and flows’ redirection, the bar will be very high but not out of reach.

https://twitter.com/C_Barraud/status/1220731768699084800

In the meantime, the U.S. will have to crush its record high level of “Crude Oil and Petroleum Products” exports to #China reached in Oct. 2017 (bit.ly/38ookmT).

Focusing on manufactured goods, the target for 2020 implies a ⬆ of $33.6B from 2019 (+68%) while the target for 2021 implies a ⬆ of $45.5B from 2019 (+92%).

The problem is that a lot of factors prevent the U.S. to export such amount…

*U.S. Export Control System
*Tariffs on $360bn remain in place (damaging the global value chain)
*Boeing crisis with 737 max

…while China is aiming to increase its reliance on domestic production for key components, including chips and controlling systems.

#China also said last year that it was starting to favor a homegrown nuclear reactor design for new power plants.

reuters.com/article/us-chi…

➡ For the Services, I used BEA data (bea.gov) on U.S. exports to China and matched them to the list provided in Annex 6.1 (from p.76: bit.ly/3axsY3B).

Contrary to goods, categories mentioned in Annex 6.1 almost match total U.S. services exports to #China with $55.5B (vs $56.0B). In addition, 2019 exports should be higher than in 2017 implying that it will be easier for #Beijing to fulfill its promises.

The target for 2020 implies a ⬆ of $12.3B from 2019 (+22%) while the target for 2021 implies a ⬆ of $24.6B from 2019 (+44%).

#China will open its capital market as soon as Apr. (vs Dec. prior) which should lead to a significant boost.

bloomberg.com/news/articles/…

My conclusion is that #China could ⬆ significantly its purchases of services, agricultural and energy products through Aug./Sep. in order to show goodwill at the first compliance review and potentially offset disappointment related to manufactured goods.

Such a move should result in a lower U.S. trade deficit with #China and will allow #Trump to fulfill another of his campaign promises. However, it will probably lead to diversions especially from #China.

*See the potential impact (in billions) ⬇

https://twitter.com/ChadBown/status/1219571114495574016

*See the potential impact (total exports coming from sales to China in %) ⬇

🇨🇳 🇧🇷 🇸🇦 #China-U.S. Deal Sets Up #Brazil and #Saudis Among Likely Losers - Bloomberg
*Link: bloom.bg/2RnHmUN

However, my view is that #China will fall short of expectations for most of 2020 sub-targets especially if, as stated, the government only buys “on market conditions”

reuters.com/article/us-usa…

🇺🇸 🇨🇳 Therefore, it could lead to renewed tensions after the U.S. elections, whoever is elected.

https://twitter.com/C_Barraud/status/1220736890124541952

As discussed above (bit.ly/31498cf), I expected #China to miss its overall targets for 2020 and 2021 before the emergence of #Coronavirus:

🇨🇳 🇺🇸 China coronavirus could hit #Beijing’s ability to meet US trade war deal import demands - SCMP
scmp.com/economy/china-…

🇨🇳 🇺🇸 Now given the potential impact of the #coronavirus (#commodity prices tumbling), I don’t see how #China could fulfill its 2020 sub-target for AG products particularly if it buys at “market conditions”.

🇨🇳 🇺🇸 It suggests that the only sub-target that looks reachable is “services” supported by the capital market opening (April) and the implementation of the FIL (since Jan. 1st)

🇨🇳 🇺🇸 #China #coronavirus: US agriculture secretary unsure if #trade deal farm purchase agreement will be affected - SCMP
scmp.com/economy/china-…

🇨🇳 #CHINA'S MINISTRY OF COMMERCE ISSUES NOTICE ON CORONAVIRUS - BBG
*CHINA TO INCREASE SUPPLY OF NECESSITIES INCLUDING FOOD, MASKS
*CHINA'S #MEAT IMPORTS EST. TO JUMP 190%❗ YOY IN JANUARY: MOFCOM

🇨🇳 🇺🇸 #China Seeks U.S. Flexibility on #Trade Targets as Virus Spreads - Bloomberg
*Pact contains clause dealing with delays in compliance

🇨🇳 🇺🇸 #China unlikely to delay #trade deal implementation despite virus - Global Times
*Link: bit.ly/31mNos2

🇨🇳 🇺🇸 I already expected a miss before the emergence of the #coronavirus.

➡ My detaild analysis: bit.ly/2GQWnbz

However, #China will increase purchases ahead of the first compliance review to show goodwill.

https://twitter.com/C_Barraud/status/1224633265178513409