The pledges China and the U.S. made to keep prospects alive for a comprehensive trade deal did little to alter the deteriorating growth outlooks for both countries because they were sealed with something economists don’t trust: a handshake.
China agreed Friday to more than double its annual purchases of American agricultural products to as much as $50 billion, according to the U.S. That’s more of a political shot in the arm to a rural constituency that’s key to President Donald Trump’s 2020 re-election bid than it is a meaningful lift to a nation with gross domestic product of about $21 trillion.Trump tweeted Sunday evening that China has begun making agricultural purchases, echoing comments he made Friday in the Oval office.
In return, Beijing convinced the U.S. to holster another tariff increase set for this week as White House officials worry about slower growth at home.
Left on the table, though, was Trump’s biggest economic threat yet and the darkest cloud in the outlook: import taxes on all remaining Chinese shipments due to start Dec. 15 that would make a range of popular consumer products more expensive.
“We have a lot of work to do, but I am confident that both sides are going to work very hard and anticipate we will be closing this,” Treasury Secretary Steven Mnuchin said Sunday on the ABC News program “This Week with George Stephanopoulos.”
Read More: Trump’s China Deal Yields Plenty of Questions, and Critics
Investors are more wary. Though U.S. equities rose last week as trade tensions eased, they trimmed gains Friday afternoon when reality set in. The deal Trump called the biggest “in the history of our Country” had a significant shortcoming: it wasn’t a signed document yet, even though it has, in effect, been on the table for more than a year.
So economists reacted with a range of skepticism and doubt about what it means for growth projections that are coming down as the 18-month trade war drags on.
“There is not yet a viable path to existing tariffs declining, and tariff escalation remains a meaningful risk,” Morgan Stanley strategists Michael Zezas and Meredith Pickett wrote on Friday. “Thus, we do not yet expect a meaningful rebound in corporate behavior that would drive global growth expectations higher.”