According to an informed source from the Trump administration, China has pledged to boost US imports of manufactured goods by $80 billion and energy by more than $50 billion over two years. Substantial prospective increase of exports from the US raises questions about the precise sector emphasis that the US government decided to place to maximize total economic impact from the deal. For market players, this creates a rich opportunity for stock-picking since the trade deal becomes a reliable signal that some US companies should expect an increase in revenues and thus are undervalued.

US service sector will also earn their business back with China, after years of deficit in the trade. Under the terms of the deal, China will increase US imports of services by $35 billion.

The prescriptive nature of growth of China imports from the US, which will include not only agricultural products, implies that not only “distressed” farmers, but also other sectors of the American economy will benefit from the deal. In December, officials expectedly announced that exact numbers would not be released to avoid “market distortions” (as well as all kinds of speculations about the political, economic benefits for government officials, lobbying activities, etc.). In short, it’s expected that the public information will reveal only general and rough breakdown of the purchases.

Accordingly, some US firms and sectors will soon get a guaranteed sales market in China (or expand the existing one), and in the absence of concrete information, their shares have a room for growth despite the stock market being at historical peak.

Under the terms of the trade deal, China will additionally buy $32 billions of agro products in two years or $16 billion per year, bringing the annual export figure to $40 billion, as Trump had suggested. By the way, China’s plans to increase purchases of these products have already been confirmed by the head of international relations of the US Chamber of Commerce, Myron Brilliant.

According to informed sources, China will also increase imports from the United States of cars and spare parts, aircraft, agricultural equipment, medical devices and semiconductors. Orders for civilian aviation products are likely to be received by Boeing, the largest exporter from the United States, which faced a sharp decline in sales of its bestselling Boeing 737 MAX, after two controversial disasters in 2018 and 2019.

However, there are fears that American suppliers may get bogged down at the stage of negotiations with Chinese customers, since the trade deal focuses on tariffs, ignoring non-tariff barriers. Such are various product standards, public procurement rules, subsidies to state firms, etc. There are even more doubts about the smooth implementation of the deal if we recall that both powers primarily need to increase the export of technological goods where they are direct competitors.

The dispute resolution mechanism between companies of the two countries will include a step-by-step escalation process, up to discussions between Liu He and US Trade Representative Robert Lighthizer. The US reserves the right to introduce tariffs in proportion to the damage caused, however, China also has the right to introduce retaliatory tariffs. Basically, it means that the signing of the trade agreement does not completely rule out tariff escalation in the future, and there is no reason to not be skeptical about the “fragile peace” that the Phase One deal has brought.

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