In a letter handed to President Trump at the White House, Chinese President Xi Jinping said, “I attach great importance to your concerns on agricultural products,” possibly a factor in the tentative “mini-deal” between the nations that includes a resumption of agricultural trade under terms set by the two governments. Trump said China will buy from $40 billion to $50 billion of U.S. farm exports but there was no joint description of the mini-deal, which would not touch the tariffs that have throttled free trade.
Negotiators will draft a final text in time for signature at an Asian-Pacific meeting in Chile in mid-November, said Trump on Friday. “We’ll do a formal signing with President Xi and myself.” The mini-deal also covers financial services, intellectual and currency transparency on China’s part while the United States would suspend an increase in tariffs due to take effect today on $250 billion of Chinese goods. Trump has yet to decide on tariffs set to take effect on Dec 15 on $150 billion of consumer goods made in China.
“That’s the largest order in the history of agriculture,” said Trump during an Oval Office meeting with Vice Premier Liu He. “So I’d suggest farmers have to go and immediately buy more land and get bigger tractors.” Trump said the purchases would be made over a two-year period. Treasury Secretary Steven Mnuchin said that within two years, purchases would “scale up to an annual figure” of $40 billion to $50 billion.
“It looks like the ‘deal’ puts US farmers back to where they were pre-trade war except the tariffs are left in place,” tweeted economist Joe Glauber of the International Food Policy Research Institute.
Before the trade war, China was the No 1 ag export customer with purchases that averaged $21 billion a year. It has tumbled to fifth place, with purchases forecast by USDA for $7.5 billion this fiscal year. In recent weeks, China has exempted some purchases of U.S.-grown goods from its retaliatory tariffs. Since Oct 1, exporters sold 1.55 million tonnes of U.S. soybeans worth $535 million for delivery to China. Chinese companies bought 18,800 tonnes of pork in the first week of this month and reportedly are buying more. China is the world’s largest producer, and consumer, of pork but output has fallen in the wake of an epidemic of African swine fever.
In a newsletter to U.S. hog farmers, the National Pork Producers Council said it “welcomed recent reports that China is making purchases of U.S. pork and currently excluding it from the application of retaliatory tariffs. However, NPPC seeks permanent removal of all punitive tariffs to address China’s unique pork supply need.”
“While we are glad to see a détente in this seemingly endless trade war, the tangible benefits to American family farmers and ranchers are unclear,” said president Roger Johnson of the National Farmers Union, one of the few farm groups to comment immediately after Liu and Trump spoke to reporters. Most U.S. farm groups have called repeatedly for removal of retaliatory tariffs and a return of the open market.
Chinese negotiators made offers, from time to time, during trade talks of large purchases of U.S. farm exports as an element in resolving the trade war and narrowing China’s trade surplus with the United States. Trump uses trade surpluses and deficits as a way to gauge if trade relations with other nations are on proper footing.
On Monday, Bloomberg reported that China wants more discussions over the details of the mini-deal before Xi signs it. In addition, Beijing also wants Trump to scratch the tariffs scheduled for Dec 15, said the news agency.
In a statement issued last week, the Chinese Commerce Ministry said “the two sides have made substantial progress in the fields of agriculture, intellectual property protection, exchange rates, financial services, expanding trade cooperation, technology transfer and dispute settlement.” The two-paragraph statement did not mention a target for agricultural purchases.
If the $40 billion-$50 billion in sales came to fruition annually, it would make China and the United States highly reliant on each other in food and ag trade.
China imported nearly $114 billion in agricultural goods in 2016, said the Center for Agricultural and Rural Development at Iowa State University in a 2018 report. At that level, purchases of $40 billion of U.S. goods would amount to 35 percent of imports. The USDA estimates ag exports will total $137 billion this year. Sales of $40 billion to China would be 29 percent of that total.
Analysts disagree how quickly and how far U.S. agricultural production could climb if China abruptly increased its purchases. Some say the flow of exports would alter, so more goods went to China, but there would be a limited overall increase.