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US-China phase one trade deal may not hold, tariffs could return: Expert

US-China phase one trade deal may not hold, tariffs could return: Expert
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China’s President Xi Jinping and U.S. President Donald Trump attend a welcome ceremony at the Great Hall of the People in Beijing on Nov. 9, 2017.

Nicolas Asfouri | AFP | Getty Images

China could face difficulties fulfilling its commitment in the so-called phase one trade deal with the U.S., allowing President Donald Trump to once again raise tariffs on Chinese goods, a trade expert warned on Wednesday.

That’s especially the case when the deal — expected to be signed in Washington on Wednesday — would involve Beijing increasing its imports of U.S. goods and services by at least $200 billion over two years, said Deborah Elms, executive director at consultancy Asian Trade Centre.

To meet that additional $200 billion, China would have to buy a “crazy amount” of U.S. “agricultural goods, machinery especially aircraft and energy products,” noted Elms. For some products, Beijing may have to more than double its purchases by reducing tariffs on those imports and stop buying them from other sources.

“If the Chinese don’t achieve those purchase price targets, the U.S. could impose new tariffs or remove existing promises or all sort of things could happen,” Elms told CNBC’s “Street Signs Asia.”

“I think the risks remain for companies between now and at least November that phase one doesn’t even hold,” she added.

The U.S., especially the agriculture sector, could also find it challenging to supply that amount of products to China, said Elms.

China bought around $186.29 billion of American goods and services in 2017 before the trade war started, according to data from the U.S. Census Bureau. In terms of agriculture products, China bought $24 billion from the U.S. in 2017 and is expected to increase that by $32 billion over two years, Reuters reported.

The U.S. and China, the world’s top two economies, have engaged in a tariff fight for more than two years. The trade war has affected business confidence and led institutions such as the International Monetary Fund and the World Bank to downgrade their forecasts for global economic growth.

The two sides reaching a “phase one” trade deal — which is not expected to include the reduction or removal of elevated tariffs — has brought some relief to the business community. But Elms warned that further progress will likely take “another year or more” to come.

“So, we’re stuck with tariffs for a very long time,” she said.

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