China Was Desperate For A Trade Deal, But The G-20 Agreement Is A Mirage

This agreement is only a pause, and the announced tariffs would be recovered if improvements are not evident. The tariffs announced for January 1st would be increased to 25% if China does not comply in 90 days.

The differences in the interpretation of the agreement between the Chinese and US administrations can be seen in their official statements.

While the US says that China will change its policy with respect to intellectual property, capital control, and legal security, China only says that they “will work together”. While the US states that the agreement is invalidated after 90 days, China does not mention the deadline. While the US mentions that the purchases of North American products will increase in specific sectors, China only talks about buying more products.

This agreement does not change the trade and policy differences of both countries, but it is very similar to the failed agreement reached with China in May that ended in nothing. We have to be very cautious and wait to see if real economic data improves. If China continues to devalue the Yuan and inject capital into its financial and corporate sectors it will be a sign that the agreement has no credibility for the Chinese government itself. Furthermore, as leading indicators show, the global slowdown is much deeper and complex than the differences between China and the US on trade. If the global economy recovered the trade growth levels of 201, global GDP slowdown would still be evident, and more pronounced than consensus currently estimates.

This trade deal is not only vague, conditional and temporary… It does not disguise the slowdown of major economies, which had nothing to do with trade wars and a lot to do with debt saturation.

Be careful thinking that this is a catalyst that puts the world back in growth and multiple expansion modes. The reality is that this deal is not a catalyst for the global economy.

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