U.S. Trade Representative Robert Lighthizer has released a two-page summary fact sheet [pdf link here] outlining the “Phase-One” agreement in principal. From research into the material the principal agreement appears to be an 86-page document covering nine chapters. The fact sheet covers the top lines of seven chapters:
For undisclosed reasons (we can guess, but probably shouldn’t on this one) the 86-page agreement is unlikely to be made public until after the USMCA completes the ratification process in congress (both chambers).
Given the politics in China, and Beijing’s position following the U.S. resolution vis-a-vis Hong Kong, it is doubtful there will be a high level signing ceremony. Chairman Xi would appear weak internally as dominant President Trump would be seen as digging Eagle claws into vulnerable dragon. Vice-Premier Liu He and USTR Lighthizer are likely to be visible faces.
It remains in President Trump’s strategic interests for Beijing to refuse being committed to granular specifics. In a very unusual way ‘uncertainty‘ actually works in favor of the U.S. objective within this trade dynamic as future investment in China will be tenuous without those specifics. An unstable ‘status quo’ is an advantage to Trump.
Because President Trump has flipped the leverage dynamic; and because hundreds of manufacturers are seeking alternatives to the risk China represents; the historic cunning and duplicity -China’s forte’- that creates distrust, actually works in favor of the U.S.
While many multinational investor interests will be watching, waiting, to see if China will (for the first time) live up to their words, President Trump will be providing alternatives and incentives…. while highlighting stability in North America.
The stock market responded exactly as would be expected on Friday to the announcement of the ‘phase-one’ agreement in principal… the market didn’t buy it, because everything remains tenuous at best. This is an indication the multinationals would/will be more likely to follow the alternatives the USMCA provides.
The Wall Street multinationals not responding favorably is a very good sign. This predicts an ongoing decoupling, which is exactly President Trump’s goal.
It really is remarkable. No-one else could have pulled this off.
Two years ago the Democrats were saying President Trump was being too hard on China… too disruptive to the world economy… Now those same Democrats say he’s not being hard enough; without realizing that’s exactly what President Trump wants them to say…
You gotta laugh.
Two years ago the Wall Street financial pundits were apoplectic, demanding President Trump resolve the China issue so they could get back to business…. President Trump now provides a resolution and those same financial voices are saying: meh, no thanks; we’ll wait to see what better stuff you’ve got planned; North America looks pretty good.
Too darned funny.
President Trump, Secretary Ross, Secretary Mnuchin and especially Robert Lighthizer will likely never get the full credit they deserve… but hey, then again, tell me the last time you knew the name of the United States Trade Ambassador?