Reconsidering the Phase One Trade Deal with China in the Midst of the Pandemic

Matthew Higgins and Thomas Klitgaard

No 20200805, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: It may be hard to remember given the pandemic, but trade tensions between the United States and China eased in January 2020 with the inking of the Phase One agreement. Under the deal, China committed to a massive increase in its purchases of U.S. goods and services, with targets set for various types of products. At the time of the pact, the U.S. economy was operating near full capacity, and any increase in U.S. exports stemming from the pact would likely have resulted in only a small boost to growth. The environment is now starkly different, with the U.S. economy operating far below potential. While the promised increase in Chinese purchases seems unlikely to be achieved, any appreciable increase in exports from the agreement is now more likely to deliver a meaningful boost to the economy.

Keywords: China U.S. trade agreement; phase one; pandemic; COVID-19; exports; World Trade Organization; diversion creation; commodities (search for similar items in EconPapers)
JEL-codes: F0 (search for similar items in EconPapers)
Date: 2020-08-05
New Economics Papers: this item is included in nep-cna and nep-int
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