Phase One of the new U.S-China trade deal has been signed, though reactions are mixed after scrutiny over the actual content of the trade deal arose, with worries over how the provisions will be met and if there is any reliable way to enforce it.
The Dow Jones Industrial Average (NYSE: DIA) started Wednesday rather weakly despite relative optimism by some investors over the first step in the negotiations to end the trade deal. Despite the weak opening, the Dow finished over 29,000 and the S&P 500 (NYSE: SPY) finished higher than usual. For many experts, however, there is far more concern than optimism, primarily because of the numerous loopholes and gaps in the agreement.
One of the more concerning facets is the simple fact that the agreement appears only to cover a small fraction of the various concerns raised by both the U.S. and China, and that there currently appears to be no means to enforce its provisions. Additionally, the deal leaves existing tariffs in place, which were the cause of the economic backlash felt in the United States to begin with. Contrary to President Donald Trump's claims of China footing the bill for the tariffs, the American consumer has long been footing the bill for the trade war, and despite optimism for the phase one agreement from some, the bill seems to do nothing to address these concerns.
Perhaps most concerning of the phase one agreement, however, is that while the deal stipulates China will increase its U.S. imports by $200 billion over two years, there is no actual stipulation of what China will buy from the U.S. and how it will achieve this goal. There is also speculation that China may not be able to meet said goals.
Overall, the deal leaves more questions than answers due to its vague language and the myriad shortcomings. Not helping and perhaps exacerbating the atmosphere of uncertainty is the President's rhetoric regarding the agreement; President Trump has been keen to tout the agreement as "...the biggest deal there is anywhere in the world by far," despite the deal paling in comparison to many other contemporary trade deals and being a far cry from the relief that the world needs from the Sino-American dispute.