Friday marks the one-year anniversary of one of President Trump’s most significant agreements: the “phase one” trade deal with China.
Addressing a crowd of company executives, trade representatives, and lawmakers in the East Room of the White House on that day, Trump was as giddy as can be. “Today, we take a momentous step,” Trump told the audience, “one that has never been taken before with China — toward a future of fair and reciprocal trade, as we sign phase one of the historic trade deal between the United States and China.”
Twelve months removed from that signing ceremony, the trade deal with Beijing hasn’t lived up to the administration’s expectations.
While the Chinese have made some improvements on opening their market to U.S. financial firms and credit card companies, the additional tens of billions of dollars in goods that China promised to import from the U.S. has lagged.
The 91-page agreement may have been full of legalese, but the core was pretty straightforward: The U.S. would lessen the tariffs on certain Chinese products in exchange for Beijing purchasing more U.S. goods and introducing structural reforms into its economy. Over time, the concept went, U.S. and Chinese trade negotiators would return to the negotiating table to hammer out a more comprehensive agreement.
The results of the deal thus far have been a mixed bag. According to tracking from the Peterson Institute of International Economics, China agreed to purchase approximately $159 billion in U.S. goods by the end of 2020. The Chinese, however, are nowhere near that goal, one the majority of trade officials and analysts largely wrote off as aspirational.
Back in the real world, China’s total purchases were roughly half of what the U.S. hoped to see at this time. Total U.S. exports to China in 2020 added up to $110 billion, only $4 billion more than the previous year. While U.S. imports of Chinese goods were reduced by 12.8% between 2019 and 2020, most of this can be chalked up to the coronavirus, which shocked global trade across the board. The overall U.S. trade deficit with China clocked in at just north of $283.5 billion, and in July 2020, the monthly deficit reentered pre-deal levels.
While Chinese purchase levels aren’t up to par, it would be unfair to overlook the benefits of the trade deal. U.S. credit card companies are finally beginning to enter the vast Chinese market after years of pushback from Beijing. Mastercard got the go-ahead from Chinese officials one month after the deal was inked. In June 2020, American Express was given approval to set up shop on Chinese soil.
The biggest achievement of the U.S.-China trade deal, however, may not have to do with trade at all. At a time when Washington and Beijing are increasingly drifting apart, and to the delight of the Peter Navarros of the world, the trade agreement is preserving some mode of communication between the world’s two economic superpowers. U.S. and Chinese officials who negotiated the pact continue to hold periodic meetings about implementation, which points back to the days when the two nations still considered each other “frenemies” rather than opponents in a long, brutal, geopolitical boxing match.
With the U.S. and China slapping restrictions on one another’s technology, poking each other in the eye over issues such as Taiwan and Hong Kong, and skipping meetings about subjects that should not be controversial (like preventing military de-escalation in the Pacific), the communication channels provided by the “phase one” deal have proven to be more important as time goes on.
Overall, the Trump administration was likely anticipating more economic dividends from its trade talks with the Chinese, but look on the bright side: It wasn’t a total flop.
Daniel DePetris (@DanDePetris) is a contributor to the Washington Examiner’s Beltway Confidential blog. His opinions are his own.
