The Indicator from Planet Money - China-U.S. Trade Agreement Fail

Last year, China pledged to vastly increase its U.S. imports during 2020 and 2021. We ask economist Chad Bown if actual spending has been keeping pace with what was promised.

  • Play Speed:
Content Keywords: China US cash NPR
00:00:00
NPR

00:00:11
everyone is Cardiff this indicator from Planet Money. Remember the US trade war with China that started a few years ago. The one where each country raised tariffs on products imported from the other country again, and again, we're almost exactly a year ago. The trade war was put on pause because of an agreement that the two countries reach with each other Chad bound is a trade Economist at the Peterson Institute. This trade agreement that the Trump Administration associated with China was unprecedented some kind of Trade Agreement. They will usually lower trade barriers like Terrace, but then they let the mortgage decide how much trade goes on afterwards but under this agreement from a year ago between the US and China China had promised it would buy two hundred billion dollars more of us good. Then China had been buying before the trade War started in really the only way

00:01:07
You get two hundred billion dollars legally is if the Chinese government guarantees it right, which is a state-driven decision.

00:01:16
It's not Marcos Sanchez there had never been a trade deal like this one for one side agreed to specifically by hundreds of billions of dollars more stuff from the other country. So when it happened the u.s. stop raising tariffs and even lowered some of its earlier Terrace and China agreed to buy these American good witch the US had hoped would be good for us businesses. Well a year later Chad is now crunch the data on whether China has actually followed through with its purchases of American Products. China did not even get close, You know, it's it's not even 60% of the way toward where we would have expected it to be at this point it more bluntly so far. It's on track to be an epic failure that explains what happened. What are the deeper economic lessons of an agreement like this one and also this agreement was made.

00:02:16
Donald Trump was president with the agreement falling short. Now. How does it complicate the way President Joe Biden approaches trade with China all that after a break?

00:02:31
This message comes from NPR sponsor red hat with red hat clouds that compete can still connect their enterprise-grade open source, software supports all the major public Cloud providers for more visit redhat.com NPR this message comes from NPR sponsor. The Capital One Quicksilver card with Quicksilver. You are an unlimited 1.5% cash back on every purchase everywhere. That's all there is to it. Just unlimited 1.5% cash back on everything you buy what's in your wallet is falling short of spending as much money on American Products as it had agreed to spend to buy so give us some details which products is China not buying as much of it as we might have expected based on the terms of the agreement. The one that everybody focuses on I think it's is soybeans. That's the sort of been in the news the most at the end of the day China actually bought a fair amount of soybean.

00:03:31
It's just they didn't buy as an enormous. And about as is the agreement had hoped it would buy. So I think that's that's a big one the other two that really struck out to me though. We weren't in the in the farm sector at all that really got less attention. And in those were things like airplanes and cars. So we sell in our tens of billions of dollars of airplanes every year to China and then cars and those were particularly hard-hit starting in 2018 during the trade war and they just really never recovered last year for China not buying as much as it said it was going to buy look at it certainly contributed the pandemic did hit China and hit them first and it hit them hard. But but in terms of all of the economy's out there in the world China, I think grew more than than most last year. I think it's growth rate was around 2.3% or so. So yes a pandemic certainly played a role, but it's not the entire explanation.

00:04:31
Or why you know, they didn't live up to that the agreement sized in your analysis of this trade deal is it there is something inconsistent maybe even contradictory between the nature of this agreement that the US reach with China and the goals that the US had been pursuing in the trade war in the first place and there's an important economic lesson in that contradiction. So what do you mean by that this agreement really was unique. We never see trade agreements that include these these purchase commitments that they say they're going to buy this amount of money and it's especially strange in the in the trade War context because one of the complaints that the US has had with China is that it's not a market economy that it's state makes too many decisions doesn't let the private sector interact with Market enough. And so here you have the US government telling the Chinese government. This is how much you want to buy. These are really big numbers. Will the only way they're ever going to get

00:05:31
Closest if the Chinese government tells its companies you don't go by from somebody cheaper. You have to buy the stuff in the United States over to live up to the deal. So it is very, you know, kind of inconsistent with what the overall US policy in and being worried about China's not being a market economy in squaring those two things and so far. We only know that the Biden ministration is looking at the agreement a new but we don't actually know what the by the administration is going to do about it as a given that China is not done what it promised to do. Does the vitamin ministration have to do something about that or it just kind of like Let It Go just ignore it if the United States government kind of ultimately less this just slide without acknowledging that there's something has gone wrong, you know, this kind of would call into question all of America's trade agreements, right if its trading partners things that they can sign something on the dotted line not come anyway.

00:06:31
Close to living up to its obligations and there's no penalty for it. You know. Hey that that that that sounds great. So, it's clear that by the ministration is going to have to do something here. They're going to have to renegotiate this some elements of this and finally tried to divide Administration is also said that it's going to work with other countries with us allies in trying to figure out how to approach trade with China. But you said a second ago that this agreement was trying to essentially says that trying to needed to buy all these products from the US which couldn't earn mean the China would be spending less money importing the same products from other countries including from those same allies that the US is trying to work with now so a how does an agreement like this one influence the way that other countries would think about partnering with the us right now, they think that all the United States cares about is getting China to buy more soybeans from us more airplanes from us and end in and not Airbus in Europe.

00:07:31
Cars For Less in and not Japan and if they think that and they're not going to be as willing to work with us on the common trade issues with China as President Biden has said that he wants to do right he wants to work with allies. Well in order to work with allies you got to trust you and right now they don't really trust United States because I think all we care about is getting China to purchase our stuff and not there's one goes directly against the interests of us allies. And so that might undermine their willingness to be our allies to work with us. That's exactly right, you know, if what they're concerned about is watching their back because they don't think the Americans are actually willing to work with them. They're not going to be willing to work with us either until I think this is the first thing that you know that the President Biden needs to convince these allies that we actually have their interest at heart as well.

00:08:22
Shut down. Thanks so much for having me. The indicator was produced by Jamila Huxtable and fact check by Sam side. Indicator is edited by Patty Hirsch and it is a production of NPR.

00:08:45
My name is Peter Sagal and I'm here to interrupt you were very serious NPR Podcast to tell you about another NPR Podcast. Mainly mine. Wait. Wait, don't tell me chances are that right. Now, you're enjoying an Earnest serious treatment of some serious Topic in the news or perhaps history or science. That's great. Really? Well, that's not what we do because people cannot live on Sirius alone. Listen now to the wait Wait don't Tell Me podcast from NPR.
Translate the current page