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3 December 2019

More than 50-50 chance of a ‘phase one, skinny deal’ between US and China - economist

The United States and China are likely to ink a “phase one” trade deal because the presidents of both countries have incentives to do so, a Yale University professor said.

“There’s a better than 50-50 chance we will get a ‘phase one, skinny’ deal, largely because both presidents, Trump and Xi, need this for domestic political reasons,” Stephen Roach, a senior lecturer at Yale University’s Jackson Institute for Global Affairs, told CNBC.

Clinching the trade agreement with Beijing could help U.S. President Donald Trump “deflect attention away” from the political problems he’s facing on the home front, Roach said. Trump, for his part, is facing an impeachment inquiry in Washington.

“Make no mistake about it, the phase one deal, as we’ve been led to understand it, is a phony deal that will accomplish nothing in the way of meaningful positive impact on American families and American consumers,” he said.

Roach explained that while the preliminary agreement addresses the bilateral trade deficit between the Washington and Beijing, it fails to recognize the United States’ existing trade deficits with other countries. “This is a deal that is purely designed as a political fix,” he added.

If the two sides cannot pin down an agreement by Dec. 15, additional U.S. levies on Chinese exports are set to go into effect. Yale’s Roach said while it’s hard to predict the next “twist and turn” on the tariff front, he thinks Trump may be “prepared at this point to stand down a bit,” as the president did in October when he suspended a tariff hike on $250 billion of Chinese imports.

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