What's Next For Chinese Trade Talks

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast.

Tracy Alloway (0:15)

And I'm Tracy Alloway.

Joe Weisenthal (0:17)

Tracy, it's good to have you back. I think we haven't been together the last couple of episodes.

Tracy Alloway (0:22)

Aw, you missed me.

Joe Weisenthal (0:23)

I missed you quite a bit. That is, you know, like I can do the podcast, I guess, by myself as you can, but it's definitely better when you're here.

Tracy Alloway (0:34)

It's better with a co-host.

Joe Weisenthal (0:36)

Exactly right.

So in the spirit of, you know, you're in Hong Kong, I'm in the US, you know, in the spirit of reuniting the two sides of the Odd Lots podcast, it makes sense that the topic we're going to talk about is the current state of US China trade talks, which as of right now, and I should specify when we're talking, it is Tuesday, March 5th. As of right now, people view that there's a lot of progress being made on this front. Whether that will be the case by the time this comes out in a few days, we have no idea.

Tracy Alloway (1:14)

Well, I appreciate your thoughtfulness, Joe, but you're right. The main reason to talk about this issue right now is we have a lot of breaking news, a lot of fast moving news, and the big news over the weekend in early March, the first week of March, was that the US and China might be agreeing some sort of trade deal.

Still a lot of details to be hammered out, of course, but all of that happening against the backdrop of one of the biggest news events to take place in China, and that is the National People's Congress, the big political powwow between the Chinese Communist Party members taking place in Beijing. And we're getting all sorts of news on not just the China economy, but also its policy outlook. So both of these events combining to be a very, very big week for China in particular.

Joe Weisenthal (2:05)

Right, and obviously people in the US, probably those who care, somewhat plugged in and aware of the trade talks going on and the status of those, probably far fewer people are aware of the NPC and the implications of that and the type of policies and projections to come from it.

Tracy Alloway (2:25)

Yeah, so we should definitely be talking about that. The big news, by the way, has to be China ratcheting down its growth forecast to a range of 6 to 6.5%. And in particular, the notion that they're moving to a range as opposed to just a single figure target, which is what they had previously, is, well, it sounds a little bit wonky. It's probably a detail for most people, but it's interesting. It gives policymakers a lot more flexibility to reach that target, and lots of people are talking about it. And of course, it feeds directly into the trade discussions. Does China need to eke out a trade deal to help prop up its growth at a relatively challenging time?

Joe Weisenthal (3:09)

All right, well, here to discuss all of this is a prior guest on the Odd Lots podcast, and excited to have him back. We have Brad Setser on today. He's a Senior Fellow for International Economics at the Council on Foreign Relations. He used to be a Treasury Longtime Economics Blogger and Longtime Observer of All Things Trade and China and US trade relations. So very timely guest. Brad, thank you very much for joining us.

Brad Setser (3:36)

It's a pleasure to be here.

Joe Weisenthal (3:38)

Brad, let's start. Obviously, we don't have a trade deal, but from what you've been able to pick up in official statements in the media, what's surprised you or hasn't surprised you about the progress that's been made between the US and China towards the deal?

Brad Setser (3:54)

I guess, you know, I obviously have been following the negotiations fairly closely, and I've been following the various ideas that China has floated fairly closely. And so in some sense, the surprise to me is that the US more or less was willing to accept the broad contours of a deal that China has kind of been outlining, at least for the past six months, if not for a bit longer.

The center of that deal seems to be a Chinese commitment that's sort of slowly being unrolled to buy a lot more agricultural products and to buy a lot more US energy to bring the bilateral trade deficit down. And then I would say there's some add-ons that sort of address some long-standing commercial disputes and that create a process where some of the newer fights could possibly be resolved or could possibly not be resolved. The easy things that are likely to get fixed are that some of the joint venture caps will be lifted. We've effectively already seen that in the auto sector. That's likely to occur in the financial services sector.