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The US-China Phase 1 Trade Agreement Is On The Verge Of Bankruptcy

Bnews An analysis in The Business Times said that there were increasing signs that the US-China trade war was gradually turning into a technological and political war. Deserted scene in San Francisco, California, USA March 20, 2020

According to The Business Times, an analysis shows that there are increasing signs that the US-China trade war is gradually turning into a technological and political war.

As U.S.-China tensions continue to rise, the Phase 1 trade agreement signed earlier this year between the world's two largest economies may not survive the COVID- 19.

While it is the benefit of both countries to maintain their relationship on the right track because noncompliance with the agreement could greatly increase the current level of economic recession, Washington and Beijing are embroiled in a The verbal war could push the deal that took months to negotiate in jeopardy.

There are increasing indications on both sides that they are pursuing undue commitments as the trade war - based on trade imbalances - now evolves into a technological war and politics is increasingly tense.

US President Donald Trump said in a recent TV interview that the United States could cut ties with Beijing if necessary and express disappointment at China's failure to control the outbreak of the disease. The US president has also publicly stated that he can play the "card" of the tariffs again, considering it a potential punishment.

As part of the Phase 1 Trade Agreement, China has committed to buying US $ 200 billion more of imported goods in 2020 and 2021. So far, Chinese purchases of US goods have been significantly reduced compared to 2019. In the first quarter of 2020, China's imports from the United States decreased by 25% over the same period in 2017. 

The gap is especially large for soybeans, transport equipment and energy. Data from both sides shows that instead of increasing, US-China trade is actually declining.

A top analyst at Shanghai JC Intelligence, Li Qiang, said China had the ability to buy $ 40 billion in goods, but the purchase had to be based on a friendly atmosphere.

During this period, it is unlikely that the US will soften its stance on the trade deal. Mr. Trump wrote on his personal Twitter page about his skepticism:
 “We have just reached a major, unfinished trade deal, and the world has been affected by the epidemic from China. Hundreds of trade deals won't make a difference. ”
This is the answer to an article published in the Global Times, citing a Chinese official who said: 
"The conclusion of the Phase 1 Trade Agreement is in fact China's wish."
However, as the global economy gradually recovers from the pandemic, this deal will be completely disrupted and will have a negative impact on the growth of both the US and China. It could cripple China's technology sector, which has benefited from this crisis.

Shaun Roache, Asia-Pacific chief economist at S&P Global, a financial services company, said: 
"The threat of imposing higher tariffs and the Cold War  Technology is becoming stronger that can disrupt trade and technology investment, losing the energy of what still promises to be an engine for recovery in 2020."
Officially, the negotiations surrounding the implementation of the deal are ongoing. On May 15, China's top negotiator, Deputy Prime Minister Liu He and U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin held an official phone call on the issue.

According to analysts, instead of completely terminating the agreement, both sides may decide to implement the agreement at a minimum to save face. Mr. Roache thinks the most likely outcome is a half-hearted compliance.

China has gradually increased purchases of US products, especially those that have political influence in the country such as soybeans, but have not reached a comprehensive agreement. America acknowledges that progress has been made and declared a winner. 

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