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13.05.2017 - 11: 15

Trump has forced China to make great concessions

There are new details about what was agreed in the field of trade reached between the US and China. It seems that it is a major victory Trump, who even during his election campaign expressed great pretensions to China due to "uneven playing field in trade." What exactly have the United States and why China had to give up?


The US and China have previously agreed to extend the access of US goods and services to the Chinese market. A formal agreement should be signed after July 16. It covers 10 areas on which the negotiators have reached a consensus, including agricultural trade and market access for financial services, according to "Bloomberg".

Economic and political relations between the first and second economies of the world have received a positive impetus after the official visit of the President Xi Jinping in the United States in April this year. "The three-day stay at the ranch CPC General Secretary Donald Trump in Florida bring closer the positions of the two superpowers on most issues. But only now the main directions of economic agreements were publicized and demonstrated the seriousness of the two countries ", - says Sergey Korobkov of Global FX.

Articulated points of the agreement reveal a cunning move by Donald Trump. "Trump has repeatedly accused China in currency manipulation and expressed dissatisfaction with the current trade relations. In fact, to further word things have not gone, Xi Jinping and decided to compromise, "- says Ivan Kapustiansky of Forex Optimum. He does not exclude that in the near future the United States will reach similar agreements with other countries, such as Mexico, Canada or Japan.

China - the third-largest US export market after Canada and Mexico, which bought US goods in 116 billion dollars a 2016 year. This is an increase of 510% compared to 19 2001 billion dollars a year. That is, in fact, the United States can not afford a trade war with such an important trade partner. However, Trump threat worked, and the US economy will only gain.

"It's definitely a breakthrough for Trump, since it is obvious that it will reduce the US trade deficit with China. According to our estimates, it will be reduced by 5-10%, if the United States will continue to expand the scope of trade and other sectors of the economy ", - says Vadim Merkulov of IR" Freedom Finance ". US trade deficit with China last year reached a staggering 347 billion dollars.

Trump operates from a position of strength

States agree with China to a position of strength, which did not exist, said Merkulov. Thus, it became known that China will allow to sign contracts for the supply of US gas, including long-term, despite the absence of a free trade zone.

By the way, the first deliveries of LNG from the United States beginning, the company Cheniere Energy (LNG) in the summer of last year, in March, its share reached 7%. But no commitment to the volume and frequency of deliveries was not Beijing at any time, could refuse the American LNG. Now Washington can get a guarantee of supply and will compete with Russia. While in China is only Russian LNG, but specifically for this market is built pipeline "Power of Siberia". A pipeline gas is traditionally less expensive liquefied. However, even now the American LNG due to transportation and other expenses for China is more expensive than the Russian.

"Now the wholesale price of natural gas at the Henry Hub, the largest gas hub of the US is at a level 3,37 1 million dollars for the BTU, or 120 dollars per thousand cubic meters familiar to us. Taking into account the costs for liquefaction and transportation of it can grow to 50% », - says Sergey Korobkov of Global FX.

"Prices for LNG from the United States is higher than in Russia, but China will be able to neutralize these losses, while maintaining the current trade relations", - said Kapustiansky. There may be political reasons. "China may buy more expensive gas in the United States in exchange for support in the region on the issue of North Korea, or the signing of new trade agreements," - said Merkulov.

Secondly, China has promised to open its market to US beef in exchange for the supply of Chinese ready meals of poultry. Another clever move Trump.

"The Chinese market holds a huge potential for US beef producers. In China, there is a shortage of quality corn beef - beef derived from cattle fattened with corn grain ", - says the box. Chinese beef market is estimated at 2,5 billion dollars. But the Chinese chicken dishes in the saturated US market to compete will be extremely difficult. In other words, Beijing offers Washington a gold mine, while in response to gain access to the place where the already overcrowded.

Finally, the third concession Beijing regards the financial sector. China gives green light to the US payment system (Visa, MasterCard and American Express), as well as a global rating agencies, where the hosts are, as you know, the United States.

However, the US also made concessions on this issue. Americans let the Chinese market only in partnership with local credit institutions and payment systems.

For whom a breakthrough, but for someone - no

US Commerce Secretary Wilbur Ross called this arrangement a truly "Herculean achievement." "This is more than has been done in the history of US-China relations on trade", - quotes its "Bloomberg".

Chairman of the American Chamber of Commerce in Shanghai Keber Gibbs apparently well versed in the Chinese style of negotiating, according to the agreements reached "a good start", but did not break. It offers start celebrating when all these promises will be fulfilled.

In China itself, where reacted low-key, knowing that the US win a lot more. Vice Finance Minister Zhu Guanyao China, announcing the agreement, rejected all questions about its details. He has repeatedly described these measures as "balanced". "Hundred-day China-US economic plan - a plan of cooperation, the action plan and the plan win-win agreement", - said Zhu.

A source: LOOK

Author: Olga Samofalova

Tags: China, the USA, Trump, Economy, Gas, Russia, analysts, international relations, trade