The “phase one” trade agreement with China assures sales of “up to $50 billion in agriculture alone,” said President Trump at a White House signing ceremony on Wednesday, although Chinese Vice Premier Liu He said sales would depend on domestic demand and U.S. prices. A senior administration official said later that the pact did not require China to remove retaliatory tariffs on U.S. farm goods — a potential barrier to exports.
“China will now welcome American beef and pork, poultry, seafood, rice, dairy, infant formula, animal feed, biotechnology, and much, much more,” said Trump. The administration said phase one, a de-escalation of the Sino-U.S. trade war, removes Chinese barriers to agricultural trade, shortens Chinese review and approval of agricultural technology to no more than 24 months, and allows U.S. use of common food names, such as Parmesan cheese — a sore point with the EU — besides calling for purchases of at least $40 billion a year of U.S. food, agricultural, and seafood products.
Farm groups celebrated the prospect of larger exports; sales to China are just half of what they were before the trade war, when China was the No. 1 customer for U.S. farm exports. Agriculture Secretary Sonny Perdue said farmers and ranchers should expect a “bonanza” and that the pact vindicated Trump’s policy of tariffs and trade confrontation. “We look forward to exporting to Chinese customers hungry for American products,” said Perdue, who had a front-row seat for the signing.
Trump said he would “be going to China in the not-too-distant future to reciprocate” and indicated that “phase two” negotiations to resolve the trade war would begin soon. In the meantime, the United States will maintain tariffs on $360 billion worth of Chinese-made products.
Moments before signing the trade pact, Liu said three factors would help determine Chinese purchases: domestic demand, commodity prices around the world, and work by both nations to encourage trade. China has a large, emerging middle class that seeks a higher standard of living, he said.
“As living standards of the Chinese people rise, we will import fine-quality agricultural products from countries across the world,” said Liu through an interpreter. “As the two sides have agreed, based on the market demand in China, in line with market terms, Chinese businesses will purchase $40 billion of agricultural products from the United States annually. If demand is strong, the companies may buy more.
“To make it happen, the governments need to foster a strong market environment for businesses to expand trade activities,” he concluded.
Hog farmer David Herring, president of the National Pork Producers Council, said U.S. pork still faces a trade war tariff of 60 percent in China. “In order to fully capture the benefits of this deal, we need China to eliminate all tariffs on U.S. pork for at least five years.” The NPPC says the tariffs cost U.S. hog farmers $8 per head, or $1 billion a year. The American Soybean Association said that as a goodwill gesture, China, the world’s largest soybean importer, should offer to remove the tariff on U.S. soybeans.
“China has not made any specific commitment” to alter its tariffs on U.S. products as part of phase one, said a senior administration official during a briefing. “They will have to take action on their own” to accommodate larger food and ag imports with their tariff schedule, perhaps by exempting more purchases from the duties. “They, I believe, will continue to improve and refine that exclusion process.”
Although the China-U.S. agreement sets targets for purchases, it does not create a system of managed trade, said the official, who spoke on condition of anonymity. “It will all be done through market forces,” he said.
“This agreement will help turn around two years of declining agricultural exports,” said Zippy Duvall, president of the American Farm Bureau Federation, the largest U.S. farm group. “The potential of tens of billions more in exports is welcome news for farmers, who are eager to compete on a more level playing field.”
Trump is scheduled to speak at the AFBF convention on Sunday. By then he may have a second trade victory to tout, since the Senate is expected to pass the United States-Mexico-Canada Agreement on Thursday.
“I hope this proves to be a turning point in our economic relationship with China, but I’ve seen enough history to be clear-eyed,” said Senate Finance Committee chairman Chuck Grassley of Iowa. “Farmers have borne the brunt of retaliation throughout this trade war.”
The think tank Center for American Progress, which is skeptical of the U.S.-China deal, noted that Trump and Liu used different figures to describe likely farm and food sales. “That does not bode well for the families whose livelihoods depend on the president to get this right,” the group said.
Fact sheets from the U.S. trade representative’s office about the agreement are available here.
To watch a C-SPAN video of the signing ceremony, click here.