Viewing offline content

Limited functionality available

Dismiss
Deloitte UK
  • Services

    Highlights

    • Major Programmes

      Connecting people and technology to anticipate and respond to ever-changing conditions, and solve for society’s greatest challenges.

    • Deloitte Ventures

      Connecting our clients to emerging start-ups, leading technology players and a whole raft of new Deloitte talent.

    • Towards net zero together

      Discover the people leading the change and what could be possible for your business.

    • Audit & Assurance

      • Audit
      • Audit - IASPlus
      • Assurance
    • Consulting

      • Core Business Operations
      • Customer and Marketing
      • Enterprise Technology & Performance
      • Human Capital
      • Strategy, Analytics and M&A
    • Financial Advisory

      • Mergers & Acquisitions
      • Performance Improvement
    • Legal

      • Legal Advisory
      • Legal Managed Services
      • Legal Management Consulting
    • Deloitte Private

      • Family Enterprises
      • Private Equity
      • Emerging Growth
    • Risk Advisory

      • Accounting and Internal Controls
      • Cyber and Strategic Risk
      • Regulatory and Legal
    • Tax

      • Global Business Tax Services
      • Indirect Tax
      • Global Employer Services
  • Industries

    Highlights

    • Ecosystems & Alliances

      An engine to embrace and harness disruptive change

    • Resilience Reimagined

      Resilient organisations thrive before, during and after adversity. How will you become more resilient?

    • Consumer

      • Automotive
      • Consumer Products
      • Retail, Wholesale & Distribution
      • Transportation, Hospitality & Services
    • Energy, Resources & Industrials

      • Industrial Products & Construction
      • Mining & Metals
      • Energy & Chemicals
      • Power, Utilities & Renewables
      • Future of Energy
    • Financial Services

      • Banking
      • Capital Markets
      • Insurance
      • Investment Management
      • Real Estate
      • FinTech & Alternative Finance
    • Government & Public Services

      • Health & Human Services
      • Defence, Security & Justice
      • Central Government
      • Infrastructure, Transport and Regional Government
    • Life Sciences & Health Care

      • Health Care
      • Life Sciences
    • Technology, Media & Telecommunications

      • Telecommunications, Media & Entertainment
      • Technology
  • Insights

    Deloitte Insights

    Highlights

    • Deloitte Insights Magazine

      Explore the latest issue now

    • Deloitte Insights app

      Go straight to smart with daily updates on your mobile device

    • Weekly economic update

      See what's happening this week and the impact on your business

    • Strategy

      • Business Strategy & Growth
      • Digital Transformation
      • Governance & Board
      • Innovation
      • Marketing & Sales
      • Private Enterprise
    • Economy & Society

      • Economy
      • Environmental, Social, & Governance
      • Health Equity
      • Trust
      • Mobility
    • Organization

      • Operations
      • Finance & Tax
      • Risk & Regulation
      • Supply Chain
      • Smart Manufacturing
    • People

      • Leadership
      • Talent & Work
      • Diversity, Equity, & Inclusion
    • Technology

      • Data & Analytics
      • Emerging Technologies
      • Technology Management
    • Industries

      • Consumer
      • Energy, Resources, & Industrials
      • Financial Services
      • Government & Public Services
      • Life Sciences & Health Care
      • Technology, Media, & Telecommunications
    • Spotlight

      • Deloitte Insights Magazine
      • Press Room Podcasts
      • Weekly Economic Update
      • COVID-19
      • Resilience
      • Top 10 reading guide
  • Careers

    Highlights

    • Hear from our people

      At Deloitte, our people are at the heart of what we do. Discover their stories to find out more about Life at Deloitte.

    • Careers Home

  • UK-EN Location: United Kingdom-English  
  • UK-EN Location: United Kingdom-English  
    • Dashboard
    • Saved Items
    • Content feed
    • Profile/Interests
    • Account settings

Welcome back

Still not a member? Join My Deloitte

US-China economic relations monthly update

by
  • Save for later
  • Share
    • Share on Facebook
    • Share on Twitter
    • Share on Linkedin
    • Share by email
Deloitte Insights
  • Strategy
    Strategy
    Strategy
    • Business Strategy & Growth
    • Digital Transformation
    • Governance & Board
    • Innovation
    • Marketing & Sales
    • Private Enterprise
  • Economy & Society
    Economy & Society
    Economy & Society
    • Economy
    • Environmental, Social, & Governance
    • Health Equity
    • Trust
    • Mobility
  • Organization
    Organization
    Organization
    • Operations
    • Finance & Tax
    • Risk & Regulation
    • Supply Chain
    • Smart Manufacturing
  • People
    People
    People
    • Leadership
    • Talent & Work
    • Diversity, Equity, & Inclusion
  • Technology
    Technology
    Technology
    • Data & Analytics
    • Emerging Technologies
    • Technology Management
  • Industries
    Industries
    Industries
    • Consumer
    • Energy, Resources, & Industrials
    • Financial Services
    • Government & Public Services
    • Life Sciences & Health Care
    • Tech, Media, & Telecom
  • Spotlight
    Spotlight
    Spotlight
    • Deloitte Insights Magazine
    • Press Room Podcasts
    • Weekly Economic Update
    • COVID-19
    • Resilience
    • Top 10 reading guide
    • UK-EN Location: United Kingdom-English  
      • Dashboard
      • Saved Items
      • Content feed
      • Profile/Interests
      • Account settings
    4 minute read 19 March 2020

    US-China economic relations monthly update The virus crisis disrupts the benefits of the US-China trade agreement

    4 minute read 19 March 2020
    • Save for later
    • Share
      • Share on Facebook
      • Share on Twitter
      • Share on Linkedin
      • Share by email
    • The world that the US-China trade deal promised
    • Truce interrupted
    • The aftermath

    Deloitte shares US-China economic relations monthly updates. Explore recent updates on the latest news and trends involving US-China relations.

    The world that the US-China trade deal promised

    Fraught economic relations between China and the United States contributed to global economic weakness in 2019. Uncertainty about how trade relations would unfold led many businesses to put major investments on hold, especially those related to global supply chains. Many companies were concerned about the possibility of higher tariffs and other restrictions on the movement of goods and capital. In the United States, there were three consecutive quarters of declining real business investment, something not ordinarily seen except during recession. In China, fixed asset investment grew at the slowest pace on record. Even in Europe, there was a deceleration of business investment. The result was that in each of these major economies, economic growth decelerated considerably in 2019 versus 2018.

    Learn more

    Learn how to combat COVID-19 with resilience

    Explore the Economics collection

    Learn about Deloitte’s services

    Go straight to smart. Get the Deloitte Insights app

    Yet as 2020 began, there was a noticeable change in how businesses and investors viewed the world. This resulted from the phase-one trade agreement between the United States and China that was signed in January. The deal provided that the United States refrain from increasing tariffs on China and agree to cut some existing tariffs. In exchange, China pledged to do more regarding protection of intellectual property. In addition, it agreed to significantly boost imports from the United States over the coming two years. Although many observers do not expect China to meet its import targets, they were nevertheless pleased that the tone of relations had noticeably changed. Moreover, the deal requires that the two sides continue to talk with the aim of reaching a “phase-two” deal that would address remaining issues and ultimately lead to a sharp decline in existing tariffs.

    After the United States and China sealed the deal, global equity prices began to rise sharply, likely driven by a belief that, at the least, the deal would avert further restrictions on trade and might lead to a renewal of trade growth and cross-border investment. Evidence of improvement came in the form of rising Purchasing Managers’ Indices (PMIs) on both sides of the Pacific. In the United States, worry about a potential recession abated, as evidenced by a reversal of the inversion of the yield curve.

    Truce interrupted

    Much of the good feeling that followed the deal evaporated after the spread of the coronavirus. The virus, which in its initial stages largely infected China, led to a near shutdown of the Chinese economy. Factories closed temporarily, only to reopen with inadequate labor supply given restrictions on travel. This caused a global disruption of supply chains in such industries as general manufacturing, automotive, technology, pharma, and apparel. In addition, as the Chinese stayed home, consumer purchases fell and tourism dried up, leading to a decline in domestic demand that likely had a negative impact on global exports and the earnings of global companies with exposure to China.

    For the United States, both supply and demand shocks from China exposed the degree to which the two countries are dependent on one another. It also raised questions about whether that dependency is risky. Some observers began to discuss the need for global companies to diversify their exposure to China. Still, given China’s massive footprint in the global economy, it is unlikely that companies can fully remove the risks inherent in doing business in China. After all, China accounts for roughly 18 percent of global GDP, a number likely to increase in the coming years. Moreover, it plays a major role in key industries that would be difficult to replicate.

    Finally, there is the question of how the coronavirus crisis will affect US-China trading relations and the negotiation of the next phase of the agreement. The decline in Chinese domestic demand that followed the spread of the virus will make it more difficult for China to meet the import targets in the phase-one deal. Some observers hoped that the virus would lead the United States to give China more time to meet the targets. However, the US government indicated that it still expects China to abide by the agreement. If targets are not met by the end of this year, the United States could return to punitive tariffs. However, if the outbreak of the virus in the United States is prolonged, imposing new tariffs could be counterproductive as they are akin to a tax increase. Indeed, there is growing support for fiscal measures to offset the negative impact of the virus outbreak, including tax cuts.

    The aftermath

    The good news is that, if China’s economy begins to rebound in the coming months as a result of stabilizing the virus situation, this will likely have a positive spillover effect on the rest of the world, including the United States. There are two channels by which this would happen. First, the return of factories in China to operating at full capacity would ultimately unclog supply chains, thus enabling key global industries to operate more efficiency. Second, a likely rebound in Chinese domestic demand would boost the demand for imported goods, from both the United States and elsewhere. It could have a positive effect on global commodity prices as well—although this could be offset by the negative impact of slowing growth in the rest of the world.

    Finally, it seems likely that, in the coming months, there will be slower growth if not recession in the United States and Europe. This would stem principally from efforts to limit human interaction in order to stifle the spread of the virus. In so doing, domestic demand would decline, and this could have a negative spillover effect on the Chinese economy. The hope is, of course, that this crisis will abate by the end of this year and that economic life can return to normal on both sides of the Pacific. How long this takes will depend on the success in suppressing the outbreak. The experience, however, will not be forgotten and could have an impact on future decisions. Some industries could be changed by this experience. Will people decide to travel less, thereby affecting airlines and hotel chains? Will there be less business travel and more video conferencing? Will manufacturers diversify their supply chains, thereby boosting production capacity in emerging countries other than China? Will this experience accelerate the switch to online shopping, thereby leading to more closures of retail stores? We cannot yet know the answers to these questions, but we do know that past crises have often been turning points for many businesses.

    Acknowledgments

    Cover image by: Sylvia Yoon Chang 

    Topics in this article

    Economics , Americas Economics , Asia Pacific (APAC) Economics , Asia Pacific (APAC) , Global Economic Outlook

    Deloitte Global Economist Network

    The Deloitte Global Economist Network is a diverse group of economists that produce relevant, interesting and thought-provoking content for external and internal audiences. The Network's industry and economics expertise allows us to bring sophisticated analysis to complex industry-based questions. Publications range from in-depth reports and thought leadership examining critical issues to executive briefs aimed at keeping Deloitte's top management and partners abreast of topical issues.

    Learn more
    Get in touch
    Contact
    • Dr. Ira Kalish
    • Chief global economist
    • Deloitte Touche Tohmatsu Limited
    • ikalish@deloitte.com
    • +1 213 688 4765

    Download Subscribe

    Related content

    img Trending

    China economic outlook, December 2022

    Article 1 month ago
    img Trending

    A view from London

    Article 5 days ago
    img Trending

    Is the dollar too high . . . or too low?

    Article 3 years ago
    img Trending

    Canada Economic Outlook

    Article 2 years ago

    Explore more on economics

    • Economics: Americas Collection
    • United States Economic Forecast Q4 2022 Article1 month ago
    • Mexico economic outlook, December 2022 Article1 month ago
    • Economics Spotlight series Collection
    • Issues by the Numbers Collection
    • US Economic Forecast Collection

    Share article highlights

    See something interesting? Simply select text and choose how to share it:

    Email a customized link that shows your highlighted text.
    Copy a customized link that shows your highlighted text.
    Copy your highlighted text.

    US-China economic relations monthly update has been saved

    US-China economic relations monthly update has been removed

    An Article Titled US-China economic relations monthly update already exists in Saved items

    Invalid special characters found 
    Forgot password

    To stay logged in, change your functional cookie settings.

    OR

    Social login not available on Microsoft Edge browser at this time.

    Connect Accounts

    Connect your social accounts

    This is the first time you have logged in with a social network.

    You have previously logged in with a different account. To link your accounts, please re-authenticate.

    Log in with an existing social network:

    To connect with your existing account, please enter your password:

    OR

    Log in with an existing site account:

    To connect with your existing account, please enter your password:

    Forgot password

    Subscribe

    to receive more business insights, analysis, and perspectives from Deloitte Insights
    ✓ Link copied to clipboard
    • Contact us
    • Careers at Deloitte
    • Submit RFP
    Follow Deloitte Insights:
    Global office directory Office locations
    UK-EN Location: United Kingdom-English  
    About Deloitte
    • Home
    • Press releases
    • Newsroom
    • Deloitte Insights
    • Global Office Directory
    • Office locator
    • Contact us
    • Submit RFP
    Services
    • Audit & Assurance
    • Consulting
    • Financial Advisory
    • Legal
    • Deloitte Private
    • Risk Advisory
    • Tax
    Industries
    • Consumer
    • Energy, Resources & Industrials
    • Financial Services
    • Government & Public Services
    • Life Sciences & Health Care
    • Technology, Media & Telecommunications
    Careers
    • Careers Home
    • About Deloitte
    • About Deloitte UK
    • Accessibility statement
    • Cookies
    • Health and Safety
    • Modern Slavery Act Statement
    • Privacy statement
    • Regulators & Provision of Services Regulations
    • Deloitte LLP Subprocessors
    • Supplier Standard Terms & Conditions
    • Terms of Use

    © 2023. See Terms of Use for more information.

     

    Deloitte LLP is the United Kingdom affiliate of Deloitte NSE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”). DTTL and each of its member firms are legally separate and independent entities. DTTL and Deloitte NSE LLP do not provide services to clients. Please see About Deloitte to learn more about our global network of member firms.

     

    Deloitte LLP is a limited liability partnership registered in England and Wales with registered number OC303675 and its registered office at 1 New Street Square, London EC4A 3HQ, United Kingdom. A list of members of Deloitte LLP is available at Companies House.