Doubts Surface on $50 Billion in China Farm Buys Touted by Trump
Prices for soybeans and hogs initially surged Friday as the deal was announced, but later retreated.
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Donald Trump says China will spend $50 billion a year for U.S. farm products as part of a “phase one” trade deal between the countries. But doubts are surfacing whether that’s even possible, bolstered by China’s reluctance to confirm the figure.
While the president expressed confidence China would meet the goal “pretty soon,” doing so would require a huge jump in China’s imports, potentially stretching its capacity to absorb the products. Trump’s trade representative, Robert Lighthizer, laid out some numbers to reporters, but declined to get very specific.
Meanwhile, Chinese officials repeatedly didn’t answer questions on the exact size of their commitment in a briefing Friday.
“I have been very skeptical,” said Joseph Glauber, a former chief economist at the U.S. Department of Agriculture. “How would they do it?”
The $50 billion figure offers Trump an attention-grabbing number to drive up enthusiasm for the deal in rural America. That’s a key political constituency for the president as he campaigns for re-election. It also helps him to defend a partial deal that leaves out many of the objectives he set when he initially launched the trade dispute.
Prices for soybeans and hogs initially surged Friday as the deal was announced, but later retreated after Chinese officials said their imports would increase by “a notable margin,” but refused to be more specific.
The annual purchase amount touted by Trump in comments in the Oval Office Friday would be more than double the $24 billion in agricultural and related products that China imported from the U.S. in 2017, the year before the trade war began. The most China ever purchased from U.S. producers was $29 billion in 2013.
U.S. Agriculture Secretary Sonny Perdue said Thursday that Chinese officials told Trump they would buy $40 billion to $50 billion worth of farm goods, but were reluctant to commit to contracts. Trump has regularly touted the commitment since announcing a deal in principle in October, sometimes casting the purchase in that range and sometimes just using the higher number.
Lighthizer suggested that the higher figure is aspirational. He told reporters Friday that China has agreed to raise its annual purchases of U.S. agricultural goods to $40 billion annually for the next two years and make its best efforts to reach $45 billion per year. Beijing agreed to specific benchmarks for individual commodities but those will be classified, he added. The goals will be re-examined after that, a U.S. trade official said.
The Chinese purchases will include processed food products, according to a person familiar who asked not to be named discussing proprietary information. China is studying whether it can reach $50 billion in purchases without having to pay above-market prices. For example, China won’t buy agricultural products from U.S. producers to meet the target if it can purchase them for less from competitors such as Brazil, the person said.
Soybeans have been the main U.S. export to China, accounting for about half the total value. A large part of the imports have been used in the past to feed China’s pig herds. Now, though, the pig population has been devastated by African Swine Fever over the last year, and demand for feed is weakening.
Brazil Relationist
A big jump in U.S. soybean purchases may also serve to upend China’s relationship with Brazil, it’s other major agricultural supplier. That could trigger “a major trade dispute” between China and Brazil, according to Glauber, who is now a fellow with the International Food Policy Research Institute.
While U.S. exports of pork and possibly poultry and beef could rise as a result of the swine fever epidemic, U.S. pork exports worldwide last year only amounted to about $6.4 billion. A 50% boost to that total would only add about $3.2 billion, and could drive up meat prices for U.S. consumers anyway, Glauber said.
Nor are the Chinese likely to reach such a purchase level through products such as corn, sorghum, distiller dried grains and ethanol, he said. Total U.S. exports of corn, soybeans, beef and pork to the entire world only averaged $44.2 billion from 2014 through 2018.
American Farm Bureau Federation President Zippy Duvall said in a statement the organization is “eager to learn the details of China’s commitment to purchase more agricultural products.”
--With assistance from Isis Almeida, Josh Wingrove and Jenny Leonard.
To contact the reporter on this story: Mike Dorning in Washington at mdorning@bloomberg.net
To contact the editors responsible for this story: Joe Sobczyk at jsobczyk@bloomberg.net, ;James Attwood at jattwood3@bloomberg.net, Reg Gale
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