12/18/2019

Unpacking The No Deal Not a Trade War Trade War Deal

"If we take what is known about the deal, its role as a Phase I deal leading to later deals, and assume it gets executed as described, with each side living up to their commitments, I think it is fair to describe this deal as a solid step forward. Realistically however, each side seems to be positioning themselves for the expected failure of the agreement and little reason to believe the deal will be executed as described. The Trump administration has maintained significant leverage if China does not follow through on its commitments and I have little realistic reason to believe China will meet its commitments. At the end of the day in any contentious negotiation, it comes down to placing risk adjust trust in your counterpart to execute their side of the agreement. Each side is signaling they have little faith in their counterpart. If we start from that premise, the Trump administration seems to have positioned themselves well expecting this deal to eventually collapse but also lower tariffs if by chance China does abide by it commitments."