Sino-American trade deal may be crumbling as both sides play blame game

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Relations between China and the US have soured to the extent that their trade deal could now be off the table.

There had been high hopes at the beginning of this year that the ice was set to thaw between the US and China, with both sides coming together to sign phase one of a trade agreement - but then came coronavirus.

China was the first nation to be hit by what became a pandemic, and now it seems as though the longed-for trade deal may become another casualty of the disease as the whole world struggles to contain it.

According to a congressional report seen by Foreign Policy, the US-China Economic and Security Review Commission strongly believes the resulting stall in trade and depressed consumer demand "raises the possibility that implementation could be disrupted".

The first part of the FTA was signed back in January 2020, with US president Donald Trump calling it "transformative" and Chinese vice premier Liu He adding that it was based on "equality and mutual respect".

As part of the agreement, China promised to buy $200 billion (€184 billion) worth of American agricultural products, as well as increasing US imports in general and strengthening intellectual property rules.

But now, with coronavirus still a threat, it's unlikely the Asian nation will be able to make good on its promise by the end of 2021 as the economy struggles to make even one per cent growth this year.

Importantly, though, the commission report reveals China put a clause in the January agreement that would allow for new trade consultations between China and the US "in the event that a natural disaster or other unforeseeable event" rendered either unable to ensure the terms could be met.

Mr Trump is said to be furious Beijing could effectively have a get-out clause and told reporters at a White House press conference: "If that happens, we'll do a termination and we'll do what I can do better than anybody. There is nobody ever been tougher on China than me."

The president has already been making bilateral relations difficult by blaming China for failing to contain coronavirus and misreporting case numbers, saying last week: "It could have been stopped in China before it started and it wasn't, and the whole world is suffering because of it."

Now, he has gone a step further by insinuating the virus was either intentionally or accidentally released from a lab in Wuhan province, the original epicentre of the disease.

Chinese foreign ministry spokesman Zhao Lijian vehemently denied such allegations on Twitter, sniping back that it may have been the US army that took the epidemic to Wuhan.

"US-China relations are at their worst point in living memory," James Crabtree, an associate professor at Singapore's Lee Kuan Yew School of Public Policy, told CNBC.

Moving forward, it seems that Mr Trump could either express sympathy to China over its suffering at the hands of coronavirus and make the terms of the phase one deal more lenient, or prove China was responsible and attempt to derail the whole thing.

And, judging by his latest comments, it would appear he is going for the latter response, despite China still being America's biggest trade partner. All in all, it does not make the environment conducive to the trade deal the world had hoped to see progressing in 2020.