It’s trade rumor time!
China plans to buy “at least” $20 billion in US farm goods in year one of a prospective trade “deal” with the US, assuming, of course, that the Trump administration manages to get a partial agreement with Beijing signed.
Since Donald Trump unveiled “Phase One” of what he swears on his kids (the ones whose names he can remember, anyway) will eventually be a sweeping deal with Xi Jinping, market participants have voiced more than a little skepticism.
As far as anyone can tell, the only things that came out of hotly-anticipated trade talks earlier this month were a ceremonial Oval Office photo op with Vice Premier Liu He and a concession not on China’s part, but on the part of Trump, who agreed not to hike tariffs on $250 billion in Chinese goods on October 15 (late in August, after throwing a fit on Twitter, Trump said he would hike the rate on that tranche of imports to 30% from 25%).
There was no decision on the scheduled December tariffs, much to the market’s chagrin, and subsequent reports suggested Beijing may be set to make the signing of the “Phase One” deal (which isn’t committed to paper yet) contingent on the White House taking that escalation off the table.
It’s also been reported that China wants to secure long-term tariff relief before agreeing to hit the $40 to $50 billion number Trump touted for agricultural purchases.
The latest from the rumor mill finds Bloomberg citing more “people familiar with the matter” (there are a ton of those) who say the $20 billion of purchases in the first year would be a step towards getting “all punitive tariffs removed” during the second year after an agreement is signed. At that point, farm purchases “could rise to $40-$50 billion”. Could. Maybe. Probably.
The punchline – and this was probably obvious to some readers right off the bat – is that, as Bloomberg points out, “the $20 billion would take [China’s] imports of US farm goods back to around the level in 2017, before the US began imposing tariffs”.
Let that sink in. If – and that’s a big “if” – all goes well in negotiations around Trump’s “Phase One” deal with Xi, China will agree to take their purchases of US agricultural products all the way back up to the same levels they were at the year before this madness started.
That, ladies and gentlemen, is the “art of the deal”. Trump has brought the global economy to the brink of recession, created all manner of market turmoil, put US farmers into bankruptcy and permanently damaged America’s relationship with the Chinese, all to secure a tenuous agreement for China to buy $20 billion in US farm products, a figure that, if it even materializes, will still be lower than levels seen prior to the trade war in 2014, 2015 and 2016.
What will China want in return for $20BN ag buys over 12 months? No tariff increases (including Oct and Dec)? drop or defer sanctions vs Huawei and other Chinese companies? Veto Hong Kong bill?
After seeing the US get rolled and run off by Turkey, China must be licking its lips. In their shoes, you’d be thinking “return to the previous status quo is not good enough, let’s make it better (for us) than it was before”.
Enough already! I am getting so tired of winning.
Does Trump have any cards at all? Surely the Chinese can see that he desperately needs a deal…….any deal.
Maybe he will to throw-in some (or all) of the “Trump”-branded properties?
Afterall, once Trump is fully outed for what he really is, what value will they have?
At the rates (even heavily discounted ones) he charges (actually, at any price at all) ,who will want to say that’s where they are staying. Most certainly, the vast majority of what is left of his “base” won’t be able to afford them…..
In comparing purchase from prior years, let’s keep in mind that their economy is growing at a rate of about 6% per year.