Initial excitement around the signing of the US-China Phase 1 trade deal has settled into circumspection about whether the Chinese commodity spending targets are achievable. Most commodity prices, including oil, have edged back from their peaks, but palladium continues to soar on environmental considerations and supply constraints.
The official signing of a US-China Phase 1 trade deal has lifted the veil of uncertainty that has shrouded financial and commodity markets for the last couple of years. However, its long-awaited signing hasn't cleared the air completely.
The consensus is that the $200-billion in goods and services and $95-billion in commodities spending targets China has agreed to, and a much-anticipated Phase 2 deal, will be difficult, if not unrealistic, to achieve.
The US deliberately kept tariffs on Chinese imports in place to ensure Phase 2 negotiations are taken seriously. However, there is a great deal of scepticism about whether the key issues that need to be resolved, including removing the web of state subsidies that support Chinese companies, will happen anytime soon.
UBS Global Wealth Management Chief Economist Paul Donovan points out that three things will not change after signing the trade deal. "First, supply chains involving China have shifted. Over half...