The first phase of the US-China trade deal signed

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The trade dispute between the United States and China lasted nearly two years and affected the global financial market’s trading trends. Finally a positive change has taken place, as the so-called first phase of the US-China trade deal was signed at the White House in Washington DC on Wednesday, 15 January.

On 16 January, 2020, the US dollar (USD) strengthened against most world currencies traded on the international foreign exchange (Forex) market. At 8:52 am CET that morning it was at the price level of US$ 97.24, according to the US Dollar Currency Index (DXY), with a daily increase of +0.02%. At the same time the US dollar (USD) and the Euro (EUR) global currency pair traded on the Forex at US$ 1.1145 per EUR, with a daily EUR decline of -0.036% against the USD. The dollar also recorded an even stronger exchange rate appreciation against the Japanese yen (JPY), with the USD/JPY pair trading at JPY 109.96 per USD, with a daily USD appreciation of +0.07% against the yen.

Under this phase one trade deal, China has agreed to purchase US$ 200 billion of merchandise of US goods and services exclusively over the next two years. The phase one deal also states that in 2020 Beijing will purchase goods and services worth US$ 77 billion and spend another US$ 123 billion on US goods and services in 2021, so that the total volume of trade will reach US$ 200 billion. By comparison, in 2017 China bought US goods and services worth US$ 186 billion. In combination with the new trade deal, US exports to China should theoretically rise to US$ 263 billion in 2020 and US$ 309 billion in 2021. Each of these amounts would mean a record acceleration of US exports to China.

This US-China trade deal is considered a ceasefire between the world’s two largest economies and includes concessions from the Chinese to the counter theft of intellectual property and the forced transfer of US technology. However, it also includes import targets for Beijing, which promised to purchase a number of American products as both sides are working towards a permanent bilateral trade deal.

The breakdown of the US$ 200 billion is as follows:

Manufactured goods: US$ 32.9 billion in 2020, US$ 44.8 billion in 2021

Agricultural goods: US$ 12.5 billion in 2020, US$ 19.5 billion in 2021

Energy goods: US$ 18.5 billion in 2020, US$ 33.9 billion in 2021

Services: US$ 12.8 billion in 2020, US$ 25.1 billion in 2021

The manufactured goods include industrial equipment, electrical equipment, pharmaceutical products, vehicles and optical instruments. Agricultural products include oilseeds, meat, cereals, cotton and seafood.

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