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Will China Uphold Its End of the Trade Deal?

The phase one U.S.-China trade agreement already looked unrealistic, but the coronavirus outbreak has put some of Beijing’s commitments in doubt.

By , an associate editor at Foreign Policy.
U.S. President Donald Trump stands with Chinese Vice Premier Liu He before signing the phase one trade deal at the White House, on Jan. 15.
U.S. President Donald Trump stands with Chinese Vice Premier Liu He before signing the phase one trade deal at the White House, on Jan. 15. Mark Wilson/Getty Images

Here is today’s Foreign Policy brief: The phase one U.S.-China trade deal enters into force as the coronavirus outbreak puts China’s commitments in doubt, British Chancellor Sajid Javid resigns, and Trump plans to divert funds from the Pentagon in order to build his U.S.-Mexico border wall.

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Phase One U.S.-China Trade Deal Takes Effect

The phase one U.S.-China trade deal enters into force today, with the United States cutting tariffs on $120 billion of Chinese goods in half and China reciprocating on $75 billion of U.S. goods, including cars, crude oil, and soybeans. Chinese officials have said they are committed to working with the United States on eliminating all trade war tariffs. U.S. President Donald Trump has lauded the deal as a “groundbreaking” first-term accomplishment.

But the coronavirus outbreak means China likely won’t be able to meet some of its limited commitments, particularly $40 billion in additional U.S. farm goods purchases over the next two years—something U.S. National Security Advisor Robert O’Brien admitted this week. He added the coronavirus would certainly disrupt the global supply chain. “There’s no doubt that the virus could have an impact on the U.S. economy and also the world economy,” O’Brien said.

Energy trade doomed. The coronavirus has already had an impact on energy markets, with global demand for crude oil projected to decline in the first quarter of the year for the first time in a decade. The United States was also banking on China making $50 billion in additional oil and natural gas purchases this year and next year; energy trade was a centerpiece of the phase one deal. That looks even more unrealistic now, FP’s Keith Johnson reports.

New Huawei charges. An indictment unsealed on Thursday revealed that Huawei, the Chinese telecommunications firm that has been a major trade deal sticking point, has been charged with racketeering conspiracy for an alleged effort to steal intellectual property from U.S. technology companies. The Trump administration says Huawei poses a national security risk as it supplies 5G networks around the world.

What We’re Following Today

Sajid Javid resigns as British Chancellor. The man regarded as Britain’s second-most powerful politician abruptly resigned on Thursday during Prime Minister Boris Johnson’s cabinet reshuffle. Javid was reportedly offered the job again on the condition that he fire all of his advisors and accept those appointed by the prime minister’s office.

The ultimatum was widely seen as the work of Johnson advisor Dominic Cummings, with whom Javid had repeatedly clashed. Javid said that “no self-respecting minister” could accept such an ultimatum and his refusal to cave earned him rare praise from voices across the political spectrum. Javid was replaced by Rishi Sunak, a 39-year old former banker who is estimated to be the richest member of the House of Commons.

Trump plans to divert defense funds for border wall. To finance a long-promised wall along the southern border, Trump is preparing to divert $3.8 billion from Pentagon programs, FP’s Lara Seligman reports. It’s the second year in a row that Trump is raiding the Department of Defense’s coffers, but this time a significant chunk of the funds will come from a controversial war account known as the Overseas Contingency Operations fund. The money would otherwise be used to build ships, F-35 fighter jets, and Army vehicles.

Sinn Fein government looks unlikely. Ireland’s largest party, Fianna Fail, said Thursday that it won’t consider a coalition government with Sinn Fein, the left-wing nationalist party that upended Irish politics when it won the most first-preference votes in last Saturday’s elections. The move makes it difficult for Sinn Fein, the former political wing of the Irish Republican Army, to take power. Fianna Fail is likely to enter into talks with Prime Minister Leo Varadkar’s Fine Gael. If the deadlock forces a second election, Sinn Fein could get a boost.

Will China accept the WHO’s help? A day after China’s Hubei province reported a major rise in coronavirus cases based on a new testing method, it appears reluctant to accept the help of a World Health Organization (WHO) advance team of experts that arrived in Beijing earlier this week. It’s not yet clear when or how the full WHO team will assess the virus outbreak. Chinese President Xi Jinping, meanwhile, is trying to contain the political damage of the epidemic: He ousted two party officials in Hubei province on Thursday.

Keep an Eye On

Ethiopia’s internet law. On Thursday, Ethiopia’s parliament passed a law that will allow jail terms for people whose social media posts are judged to have fueled unrest or violence. Though Prime Minister Abiy Ahmed has enacted reforms in Ethiopia—releasing political prisoners and journalists—he has struggled to contain ethnic violence. Rights groups say the new law could just inflame tensions.

A U.S. consulate in Greenland. The Trump administration’s budget proposal, revealed this week, allocated $587,000 to a new consulate in Greenland—reflecting growing concerns about Russian and Chinese moves in the Arctic. But the planned consulate also comes just months after Trump floated a plan to buy the island from Denmark, FP’s Robbie Gramer reports.

Bolsonaro’s cabinet. Brazilian President Jair Bolsonaro announced a new chief of staff on Thursday: Gen. Walter Braga, previously the chief of staff of the army. Braga will take office next week, becoming the seventh military advisor in the president’s 20-person cabinet. Bolsonaro is skeptical of politicians: He came to power on a pledge to break away from traditional parties.

Odds and Ends

Poland’s biggest utility company PGE, which generates electricity mostly by burning coal, is looking for a new chief executive. A Polish Greenpeace activist, Pawel Szypulski, has said he will apply for the job—with a plan to eliminate coal from power production by 2030. PGE owns Europe’s biggest coal plant. “One can no longer continue the business as if there is no climate crisis,” Szypulski said. “I will apply for the job today.”

That’s it for today. 

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Audrey Wilson is an associate editor at Foreign Policy. Twitter: @audreybwilson