On Tuesday there was still more evidence to support the conclusion that Donald Trump’s “Phase One” trade “deal” with China is no “deal” at all.
The agreement, touted late last week in a predictably silly Oval Office photo op with Vice Premier Liu He, was so short on specifics that analysts appeared to struggle over the weekend to put together coherent summaries. Goldman, for example, called it “fairly straightforward in certain aspects” – an apparent euphemism for “clear as mud”.
On Monday, amid reports that China was seeking a fresh round of talks by the end of the month in order to iron out the myriad “wrinkles”, Global Times editor Hu Xijin attempted to shore up sentiment around the nebulous truce:
China has the market demand to buy $40 billion-$50 billion worth of US farm products. China won't make a commitment that it can't honor; once it promises, it will fulfill it.
— Hu Xijin 胡锡进 (@HuXijin_GT) October 14, 2019
That tweet came hours after a similarly upbeat assessment.
Well, as it turns out, the “massive quantities” of farm purchases that Trump has spent the last several days shouting about may be contingent on the US lifting tariffs.
“Chinese officials are willing to start purchasing more US agricultural products as part of the ‘phase one’ trade deal, but it is not likely to reach the $40 billion to $50 billion touted by Trump under current circumstances”, Bloomberg reports, citing people familiar with the situation.
Essentially, this is about logistics and math, two things Trump does not care much for. Beijing recently extended waivers in order for domestic buyers to purchases US farm goods, but as Bloomberg goes on to explain, “waivers are seen as being impractical for volumes as large as $50 billion a year”.
According to the same sources, Beijing is looking at buying all kinds of things, including, but not limited to: soybeans, cereals, cotton, ethanol, fertilizer, juice, coffee and meat.
And yet, getting to Trump’s $40-50 billion number may require further tariff relief from the White House, something the president (and certainty his trade hawks) have been reluctant to grant.
In any event, this is just more evidence to support the contention that what markets got last week was a farm-to-table serving of nothing.