As the day wore on, and it became apparent that market participants were either too exhausted after this week to care, or else underwhelmed by the lack of specifics, the Trump administration sought to expand a bit on the nebulous soundbites delivered by Chinese officials during their trade deal press conference.
Bob Lighthizer briefed reporters at the White House and attempted to put some numbers on the “commitments” that China purportedly made.
For instance, Lighthizer claimed China has made a two-year commitment to hit Trump’s $40 billion to $50 billion target range for annual purchases of US agricultural goods. As we’ve detailed exhaustively in these pages (including first thing Friday morning), that seems far-fetched.
The agreement, Lighthizer continued, calls for Beijing to buy at least $16 billion more per year compared with $24 billion in 2017.
“Here’s how Lighthizer described the [farm] purchase math to reporters: $24 billion per year baseline purchases made by China using 2017 data [plus] an additional $16 billion per year for two years”, CNBC’s Kayla Tausche said, adding that China is also supposed to make their “best effort” to buy another $5-10 billion each year.
Ultimately, that would get the annual total for the next two years to $40 billion minimum, and “possibly more”.
The agreement does include targets for purchases by China of specific commodities, but those won’t be disclosed in public, Lighthizer said.
As a reminder (and at this point, it seems like we roll out this chart once an hour), we are nowhere close to those numbers. And if you read the two linked posts above, there is every reason to doubt whether this “plan” is achievable.
As Bloomberg’s Brian Chappatta dryly noted of Lighthizer’s math, “this is useful, though of course China didn’t mention these today”.
Right. In other words, the people who are supposed to be doing the buying (the Chinese) have not yet verified these numbers, and in fact went to great lengths on Friday during the press conference in Beijing to avoid committing to any specific targets.
“It remains to be seen if these hard numbers are solidified in a final, signed agreement, with consequences for falling short”, Chappatta added.
Later, officials said the administration expects China to continue their purchases beyond two years. Additionally, the same officials indicated that China agreed to abandon forced tech transfers and insisted the administration has mechanisms in mind to ensure enforcement.
Meanwhile, Larry Kudlow said the prospective farm buys are “probably worth about a half point of GDP” and said China’s commitments are “doable”.
Talks around “Phase Two” are set to “start immediately”, Kudlow claimed.
Given that “Phase One” hasn’t even been signed yet, one might say that Kudlow is suggesting “Phase Two” is in the works before the ink is even dry – figuratively and literally.