Over the past several days, questions have emerged about the feasibility of China’s promises under the “Phase One” trade deal with the White House.
The problem isn’t Beijing’s commitment to upholding its end of the bargain. Well, that’s surely an unspoken problem, but outwardly, China is committed to complying with the truce.
The issue now is that the coronavirus epidemic threatens to undercut the Chinese economy, making it more difficult for the Party to live up to its promise of purchasing some $200 billion in US goods and services over the next two years.
For now, the assumption is that it’s just the year-one purchases (some $77 billion) that are in jeopardy, and even there, officials will likely be keen to emphasize that any shortfall in the first half of the year can be compensated later after the effect of the virus dissipates.
Whatever the case, it’s not the best news for America’s farmers and businesses affected by the trade war, something Larry Kudlow underscored on Tuesday.
“I wanna talk about how strong things are”, Maria Bartiromo began, gesticulating with both hands. But before giving Larry a platform to bombard the voting public with the usual mix of facts, half-truths and misinformation about the economy, Bartiromo asked him to weigh in on the virus.
“I think the US economic impact is gonna be minimal”, Kudlow mused.
Frankly, I was surprised Larry was willing to admit there would, in fact, be an impact. He went on to project that the hit could be 0.2% in the first half, and the same “later in the year”, which is actually consistent with private sector estimates. So, good for Larry for being honest – I suppose.
When Larry donned his virologist hat, it got silly. “There’s a shelf life in the past of five to six months”, he stammered. “The virus was not in its full flower, if you will”, Kudlow went on to say, while touting Monday’s better-than-expected ISM number. He then corrected himself: “It’s full damage“.
Ultimately, Kudlow said that while he understands industry in China is “shut-in”, he needs you to know that “it’s not the end of the world”.
He’s correct, but with the possible exception of unscrupulous actors in the dark corners of the blogosphere, nobody is actually predicting the “end of the world”. Larry was constructing a straw man. The question is whether the economic impact may be far worse than anyone anticipates.
To be fair, it’s wholly unrealistic to expect Kudlow to adopt a dour tone on television, let alone on state television.
All in all, this interview was fine, as far as Fox interviews with Larry go. The key takeaway was this on the virus’s impact on the “Phase One” truce:
The export boom from that trade deal will take longer because of the Chinese virus. That is true.
In addition to being “true”, it’s also bad politically, as it could mean fewer data points from Trump to tout headed into the election.
Of course, if Democrats can’t even manage to pull off a caucus without screwing something up, I guess it won’t matter.