Cathay Bank/UCLA Anderson Forecast U.S.-China Economic Report: The Pandemic and the Trade Agreement

UCLA Anderson School of Management

For immediate release:

Cathay Bank/UCLA Anderson Forecast U.S.-China Economic Report: The Pandemic and the Trade Agreement

Los Angeles (March 31, 2020) — In its annual report for 2020, the Cathay Bank/UCLA Anderson Forecast U.S.-China Economic Report focuses on two significant events transpiring concurrently. The first is the 2020 COVID-19 global pandemic. The second is the Phase One trade agreement between the United States and China, which both nations claim will increase trade between the two countries.

The report, authored by UCLA Anderson Forecast economist William Yu and Forecast director Jerry Nickelsburg, notes that there is clearly uncertainty with respect to the length and severity of the coronavirus pandemic. It is possible, the report says, that it is early in the life cycle of this epidemic and that the peak is yet to come.

“To be sure, a fall-off of global tourism and transportation and the stalled production and consumption of goods and services are a blow to both the U.S. and Chinese economies,” says Yu. “Indeed, the nascent global recession will dramatically affect trade between the two countries. It is this latter event that will dominate the U.S.-China economic landscape through 2020, with any impact of the Phase One trade agreement pushed into 2021.”

The report provides a preliminary estimate of some of the economic costs, including a direct monthly international tourism loss of $21 billion to the U.S. economy.

The report also looks in detail at the Phase One agreement and its ultimate economic impact. The agreement covers seven subjects: intellectual property, technology transfer, food and agricultural products, financial services, macroeconomic policies and exchange rates, expanding trade, and bilateral evaluation and dispute resolution. If China and the U.S. follow through, it would mark a milestone for a less acrimonious and more sustainable economic relationship between the two countries. However, if Washington perceived that China was not living up to the agreement, then there could be a return to the trade war mode.

Yu and Nickelsburg consider the Phase One deal a reset in relations between the two countries, saying that, thus far, it has prevented the U.S. and China from engaging in a full-blown trade war. That said, there remain many areas of economic tension, such as technology, where the telecommunications industry remains a key arena of competition.

The economists conclude that 2020 will be a crucial year for both the U.S. and China. It is the U.S. presidential election year, and turbulence from the public health emergency and the economic recession will be Washington’s focus. For China, the early 2019 warning from the Chinese press “(to) be on guard against black swans and keep watchful for gray rhinos” was prescient. Navigating the restructuring of the Chinese economy while managing the course of the pandemic presents challenges to coping with expected and unexpected issues, replete with related domestic political overtones. Overlaid on this landscape is the many-faceted strategic competition between the U.S. and China, as well as the restructuring of supply chains with likely near-term negative costs. Thus, there is heightened uncertainty with regard to U.S.-China economic relations for the coming 12 months, creating both risks and opportunities.

Read the full Cathay Bank/UCLA Anderson Forecast U.S.-China Economic Report.

About UCLA Anderson Forecast
UCLA Anderson Forecast is one of the most widely watched and often-cited economic outlooks for California and the nation, and was unique in predicting both the seriousness of the early-1990s downturn in California and the strength of the state’s rebound since 1993. More recently, the Forecast was credited as the first major U.S. economic forecasting group to declare the recession of 2001. Visit UCLA Anderson Forecast at

About Cathay Bank
Cathay Bank, a subsidiary of Cathay General Bancorp (Nasdaq: CATY), offers a wide range of financial services through nine states in the U.S. as well as a branch in Hong Kong and representative offices in Beijing, Shanghai and Taipei. Founded in 1962 to support Los Angeles’ growing Chinese American community, in the past half-century the bank has expanded and grown with its customers, providing them with the tools and services they need to achieve their goals. Learn more at FDIC insurance coverage is limited to deposit accounts at Cathay Bank’s U.S. domestic branch locations.

Follow @UCLAAnderson on Twitter and Facebook.

Media Contacts:

Rebecca Trounson – (310) 825-1348
UCLA Anderson School of Management

Paul Feinberg – (310) 794-1215
UCLA Anderson School of Management