WASHINGTON (Pakistan Point News / Sputnik - 18th January, 2020) The United States and China are still at risk of engaging in a trade war if Beijing falls short of promised purchases under a newly-signed trade pact, Dutch banking group Rabobank said in a research report on Friday.
Earlier this week, President Donald Trump and Chinese Vice Premier Liu He signed a Phase One trade deal that requires Beijing to buy $200 billion in US goods, respect intellectual property rights and halt Currency manipulation.
"The phase-one agreement is subject to an enforcement mechanism," Rabobank said in the report prepared by its food & agribusiness research unit. "There's still the risk of a trade war in the second half of 2020, if China's agreed purchasing pace is slower than required, especially in a US election year."
Focusing on the food and agribusiness aspects of the deal, Rabobank noted that the Chinese committed to increase US agricultural imports by $32 billion, bringing its total purchases from the United States under that category to $36.5 billion in 2020 and $43.5 billion in 2021.
Imports of grains and oilseeds (G&O) like corn and soybeans would only account for about half or more of the deal, and China would have to buy other food products as well to honor its commitment, Rabobank added.
"According to Rabobank's projections, G&O imports will only reach 50% to 60% of the purchase targets in 2020 and 2021," the research report said. "This means China will have to buy large quantities of non-G&O agricultural products, such as meat, seafood, dairy, and cotton to make up the difference. To facilitate the high procurement, most of the existing retaliatory tariffs are expected to be removed soon."
Despite skepticism among analysts over monitoring implementation, the White House has claimed the terms of the deal will be fully enforceable.
Even with Wednesday's signing, both the United States and China have maintained most of the tariffs they imposed on each other prior to the deal. It remains to be seen if the two sides will waver from this.
