The trade deal inked by Washington and Beijing is likely to hold for now, according to former top White House trade negotiator Clete Willems.
“I think the reason the deal is gonna hold for the time being is that China’s actually doing a good job at implementation,” Willems, a former deputy director at the National Economic Council, told CNBC’s “Street Signs Asia” on Tuesday.
The two economic powerhouses signed a phase one trade deal in January following a protracted period of tensions that saw both parties slapping punitive tariffs on each other’s goods.
“From an election standpoint, this deal remains a winner for the (U.S. President Donald Trump) because he was able to get China to make certain commitments that others have failed to do and the U.S. really didn’t … give up much in exchange,” Willems said, in reference to the U.S. presidential election in November. “They kept almost all of the tariffs in place. So, it still allows the president to say he’s tough and he got a deal.”
Willems’ comments came White House advisor Peter Navarro stoked confusion about the status of the U.S.-China trade deal, which briefly sent investors reeling.
Navarro later clarified that the trade deal is not over, claiming his remarks during a Monday night interview with Fox News were taken out of context. Earlier, Fox reported that Navarro — widely known as a China hawk — had blamed the breakdown of the trade deal on China not warning about the coronavirus outbreak earlier.
Following the debacle, Willems said there are “two lessons” that investors can learn from this.
Firstly, he said: “You can’t read too much into any one statement made by any one advisor. A lot of us in the administration did have different views.”
“Something this significant like pulling out of … (the) phase one deal, you know, that’s gonna come from the president himself,” said Willems, who is now a partner at law firm Akin Gump.
After Navarro’s interview on Fox, Trump said the “China Trade Deal is fully intact.”
Looking forward, Willems said the second lesson is that there needs to be more focus around “decoupling” of the world’s two largest economies. He explained that’s a “big concern” and that “there’s a broader trend that I think folks need to be worried about.”
“The China Phase One deal is basically the only example right now of policy making in Washington where we’re trying to open up markets in China and we’re trying to expand our ties,” said the former trade negotiator.
Relations between Beijing and Washington have soured in the wake of the coronavirus pandemic, as the countries feud over the origins of the virus and how each could have better handled the crisis. The two have also bickered over Beijing pushing a national security law for Hong Kong and Washington threatening to delist Chinese companies from U.S. exchanges.
“You have to look at the broader range of all the U.S. policy on China,” Willems said. “I think investors are not as concerned about that as they should be.”