The Trade Pact is Signed: The euphoria (buy the rumor) and the second thoughts (sell the news) are in process.
The Dow and the S&P both set closing records today. All three major stock indices were in record territory at some point during the day. All three pulled back from their intra-day highs before closing.
So what is actually in the agreement? The Major Chapters and Articles Address:
Intellectual Property and Technology Transfer: Respect for internationally accepted patent and copyright principles. (Subjects you've heard me carp about for years)
Financial Services: Reciprocal access to each other's markets, within restrictions.
Macroeconomic Policy and Exchange Rates: Measures to restrict Currency Manipulation and Devaluation.
Trade expansion: To the extent "commercially appropriate" we will trade each others products (particularly agricultural products).
Stunningly long lists of manufactured goods and agricultural products to which the agreement applies. (I don't even know what some of that stuff is.)
Two other things are notably absent from the agreement:
Meaningful enforcement procedures, and
Tariff Relief (which the Administration says will stay in place until after our elections)
There will be a great deal of speculation about "who won" this round:
Notably, the US gained agreement on a number of its top negotiating points - A realistic reading shows China yielded ground on all fronts - seemingly abandoning long-held positions.
China (Xi Jinping), on the other hand, gained breathing room to deal with China's slowing economic growth and political unrest (and probably to crack down on dissidents and religious minorities).
The paucity of enforcement measures reduces both sides' victory -- making this as much a gentle person's agreement as anything else.
At the risk of sounding too Shakespearean, here's the rub: On its surface, the US made out very well in this agreement. It remains to be seen whether, to what extent, and with what degree of "interpretive latitude" China abides by the spirit of the agreement. Declaring victory for either side is premature at this point.
Here is the full text of the US-China Phase-1 Trade Agreement
Photo Credit: The Guardian