WASHINGTON (Reuters) – The U.S. government expects China to honor its commitments to buy more U.S. goods under a trade deal signed by the world’s two largest economies in January despite the fast-spreading coronavirus outbreak, a senior U.S. official said on Thursday.
The U.S. Treasury official said it was too soon to make accurate forecasts for the impact of the virus on the global economy, but the base case scenario sees China’s growth dropping in the first quarter and then rebounding sharply. The impact could be more significant if the outbreak worsens, the official told reporters ahead of this week’s G20 meeting.
The International Monetary Fund said this week the epidemic had already disrupted economic growth in China and could derail a highly fragile projected recovery in the global economy in 2020 if it spread to other countries.
China’s commerce ministry on Friday said January and February exports and imports would be hit by the coronavirus outbreak, but foreign companies in most places would resume production by the end of February.
Asked if the outbreak would require changes to the Phase 1 trade deal with China, the official said: “At this stage, we’re not expecting changes to implementation of Phase 1. … We still expect them to meet their commitment, but it’s over a period of time.”
Under the deal, which took effect this month, China pledged to increase U.S. goods purchases by $77 billion in 2020 and by $123 billion by 2021, compared with a baseline of U.S. imports from 2017, the year before the U.S.-China tariff war began.
Experts had expressed skepticism that China would be able to meet such aggressive purchase commitments even before the coronavirus emerged, while reports of new cases in China and elsewhere have further intensified fears over its impact on the global economy.
But the Global Times newspaper, which often speaks for the Chinese government, reported on Thursday that China was likely to buy 10 million tons of U.S. liquefied natural gas despite a gas glut.
U.S. Treasury Secretary Steven Mnuchin will discuss the economic impact of the epidemic with senior finance officials and central bankers from the world’s 20 largest economies (G20) in the Saudi capital, Riyadh, on Saturday and Sunday.
China said on Wednesday it was not sending senior central bank and Finance Ministry officials to the meeting because of the virus outbreak.
The Treasury official said lower-level officials would represent Beijing.
Mnuchin and the other G20 officials will also discuss efforts under way among Organization for Economic Cooperation and Development members to draft new international rules for taxation, with an eye to bridging “significant gaps” and reaching a multilateral consensus this year, the official said.
Washington plans to explain its proposal for a “safe harbor” that would allow companies to opt out of proposed reforms, the official said. That proposal has drawn sharp criticism from France and other countries and threatens to stall the reform drive.
The rules would affect big U.S. digital companies such as Alphabet Inc’s (GOOGL.O), Google, Facebook Inc (FB.O), Amazon.com Inc (AMZN.O), Apple Inc (AAPL.O) and China’s Alibaba Group Holding Ltd (BABA.N).
Reporting by Andrea Shalal; Additional reporting by David Lawder; Editing by Dan Grebler, Peter Cooney and Richard Pullin