Trump’s “Beautiful Monster”
Donald L. Luskin
Thursday, January 16, 2020
More than just a phase. The deal is designed to create enough of a boom to re-elect Trump.
US Macro
Asia Macro
The Phase One “economic and trade agreement” with China has been designed to seem comprehensive enough to silence critics who will say Trump “caved,” and with enough immediate economic impact to trigger a sufficient boom to assure Trump’s re-election. $76.7 billion in additional 2020 purchases by China -- from pre-trade war levels -- of agricultural products, energy commodities and products, manufactured goods, and services, could add as much as 0.5% to US GDP, which should be on the upswing anyway because of the elimination of the risk that China will fall into a disorderly recession with global systemic consequences. It’s not clear the US can actually produce all China is promising to buy, but Trump’s hint he will remove the 2018 tariffs after the election is a strong motivator for China to follow through. China’s growth can be enhanced to the extent it complies with promises that will make its economy more free.