This analyst says the U.S.-China trade deal targets were always ‘too aspirational’

It’s an ambitious agreement that calls for a partial rollback of tariffs on goods the U.S. imports from China in exchange for a pledge from China to increase its U.S. purchases by $200 billion this year and next compared what it bought in 2017. Trump has touted the accord as a centerpiece of his plan to revive the American economy. He frames it as a momentous victory for American farmers and manufacturers that will boost U.S. exports of everything from soybeans to liquefied natural gas, and a first step in a longer negotiation that will tackle disagreements about structural aspects of the world’s two largest economies to head off a superpower showdown.

So far, however, the agreement remains a long way from delivering on those promises. Chad Bown, a senior fellow at the Peterson Institute for International Economics, estimates Chinese purchases from the U.S. have fulfilled only a third of the county’s 2020 import goal. The global pandemic and resulting slump in the two economies can be blamed for part of the shortfall. But Bown, whose “U.S.-China phase one trade tracker” is widely hailed as the most authoritative benchmark of China’s progress in meeting its trade deal commitments, argues that even from the beginning, the $200 billion target was “a bit too aspirational.”

“Two-hundred billion is a nice round number if you’re a president out there on the campaign trail,” he observes. “But when you look into [the trade data], these were just sort of astronomical numbers that I don’t think many folks thought that China was going to be able to reach.”

In an interview with Fortune’s Clay Chandler in an Eastworld Spotlight conversation on Tuesday, Bown talked about the evolution of the U.S.-China trade deal, China’s progress in meeting its targets, and how even an imperfect trade deal has benefits for both countries. He also discussed how a Biden administration might change U.S. trade relations with China. This interview has been edited for length and clarity.

Fortune: We want to talk about your U.S.-China “trade tracker” and where things stand with the phase one trade deal. But maybe first we should remind readers how we got here.

Chad Bown: Beginning in early 2018, you had a Trump administration that started levying rounds after rounds of tariffs, ultimately covering more than $350 billion worth of U.S. imports from China with tariffs. China [in retaliation], imposed tariffs on tens of billions of dollars, not one for one, but lots and lots of tariffs on lots of lots of American exports. Towards the end of 2019, recognizing that there is a U.S. election happening in November 2020, the Trump administration essentially said, “Let’s get a deal; let’s see what we can get at this stage so that we’ll have a relatively calm year heading into the election.” And so they kind of took what they could in an agreement with China that they announced the details of in January of 2020, [and] it went into effect in February of 2020. [And the deal] did not, by far, resolve any of the issues of the trade war.

But for political purposes, the really big part of the deal from President Trump’s perspective was the claim that China would buy $200 billion of additional [goods] on top of what they were already buying. It’s a really really big number, it’s an additional $200 billion split over 2020 and 2021. One of the concerns historically is that China has not been buying enough American exports, but these numbers were a bit too aspirational. $200 billion is a nice round number if you’re a president out there on the campaign trail. But when you look into it, these were just sort of astronomical numbers that I don’t think many folks thought China was going to be able to reach. 

So what does the trade tracker tell us? Where is China in terms of its progress in meeting the phase one targets?

Energy is sort of nowhere close… [and] that’s not surprising. If you remember back to the early part of 2020 when the pandemic hit, people stopped moving around, people stopped demanding oil, and oil prices basically went to zero. The way the agreement was written, it was written in value terms. So even if Americans had extracted every barrel of oil they had and China had agreed to buy all of it, when the value is priced at zero, [what] shows up in the trade data is zero. So that hasn’t done well so far in 2020, but that might have been expected given what happened.

Manufacturing has actually done reasonably okay compared to everything else. But that was being driven by some products that could disappear… like high-tech products [and] semiconductors. The Trump administration has been rolling out a series of export controls for national security reasons; this is wrapped up with the concerns over Huawei. So the very same products that so far have been doing okay in the manufacturing part of the deal, they are threatened to be taken away.

The last part, and the most politically salient part, of course, is agriculture. Soybeans dominate American agriculture, it’s a $12, $13, $14 billion dollar a year set of exports to China. That’s what [the Trump administration] really hoped would grow in this deal. And so far the data isn’t too optimistic; [China’s agricultural purchases are] less than 50% of the way on a pro-rated basis to where we would have expected. A lot of those crops [are going to] get pulled out of the ground in September and October, and start going off to China in the weeks after that. So agriculture may end up doing okay.

How is the trade deal affecting the U.S.-China relationship?

The overall U.S.-China relationship has deteriorated so badly over the course of 2020 with the pandemic, with other non-trade related events like Hong Kong, and what’s going on with the Uighurs. The trade agreement is the one positive thing—even though it’s not living up to the numbers—that is holding together any sort of semblance of a U.S.-China relationship at this stage. So I think almost ironically, having a trade agreement is preventing things perhaps from getting worse.

That being said, I think it has also contributed to the fact that things have gotten worse. [It has] effectively taken the pressure off the Trump administration to continue to engage with China in a proactive way on trade. And other folks within the Trump administration, who may have a very different perspective toward China may be having a bigger influence on overall U.S. policy right now. So it’s kind of a mixed bag in terms of what this trade agreement means for the U.S.-China relationship at the moment.

Do you anticipate a shift in U.S. economic policy towards China under a Biden administration?

I don’t think there would be a radical shift, except perhaps in the way that they choose to engage on some of the issues with China. They would be more likely, for example, to work with allies and not just go off on a sort of unilateral trade war by themselves. [A Biden administration might] work with Europe, with Japan, with countries that have common concerns with the United States on a lot of these key trade issues [with China].

What kind of challenges will a new administration face?

I think a new administration ultimately has a lot of amends to make with those allies. [The Trump administration] has been imposing tariffs on Europe and Japan, whether it’s steel and aluminum, threatening to do so on cars, starting fights wherever it could. I think an initial sign to watch for from a Biden administration is its approach to those allies. Would they seek to get rid of those kinds of tariffs? Would they overtly make amends and sort of negotiate resolutions to a lot of the fights that the Trump administration may have started, or other ones that [the Trump administration] hadn’t been able to resolve during their time in office? I think if you see that, that would be signs [saying], “We do that first and then we can work together on the areas of common concern that we have with how China is engaging in the trading system.”

This interview is part of Eastworld Spotlight, a series of conversations on matters of business, tech, and finance with executives, experts, entrepreneurs, and investors in Asia. Subscribe to Fortune’s Eastworld newsletter to get them in your inbox.