US-China trade deal: A brighter future after coronavirus recedes?

The coronavirus has been taking its toll on the global supply chain as many factories in Mainland China face a multitude of challenges to resuming operations, such as critical shortages of staff and materials inaccessibility. Those who have managed to combat these challenges have found that shipping and freight operations are disrupted.

The coronavirus arrived after almost two years of confrontation between the United States and China. These tensions eased considerably in January this year when both sides signed a long-awaited Phase One trade deal. As part of the deal, China is obliged to purchase US$200 billion of U.S. goods and services over the next two years. In exchange, the U.S. has agreed to cut tariffs on US$120 billion of Chinese products from 15% to 7.5%. The spread of the virus, however, is likely to make it difficult for China to fulfill its Phase One pledges.

How can China restart its economy while continuing to deal with the impact of the coronavirus? The Phase One agreement is a breakthrough, but will China be able to meet these purchase commitments? The long-term sustainability of the agreement remains a concern. When will the most important – and difficult – Phase Two discussion be engaged? Also, what should Hong Kong businesses be considering in their future investment plans if they wish to avoid possible disruption in the future?

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