Update on U.S./China Trade Agreement

The economic downturn from COVID-19 is escalating calls to move the U.S. supply chains away from China. However, as one of the largest buyers of American farm goods, ag leaders worry changes could put the Phase One Agreement at risk.

The pandemic has interrupted progress on the $40 billion dollar deal for U.S. agriculture. Despite supply chain disruptions, Beijing shows signs that it wants to buy U.S. farm goods.

According to David Salmonsen, Chief Economist with the American Farm Bureau Federation, China has been in the market for soybeans, corn, wheat, beef, pork and cotton.

“Just last week, we heard that they had granted some more tariff waivers for products like barley and blueberries,” he added.

Trade representatives continue to work with China to find innovative ways to meet Phase One commitments. However, despite recent efforts, analyst say that China is not on track to hit the $40 billion dollar target.

“Every month, they needed to buy, to meet the $40 billion dollar commitments they made in the Phase One Agreement. They’re not on track for that, yet,” Salmonsen said. He goes on to say that the reason being is recent economic hits to China and that they usually buy during harvest time.

The State Department is working with agencies and foreign governments to decrease America’s reliance on China-made products. Farm leaders warn a potential consequence could be a fractured Phase One deal.

Trade representatives remain optimistic.

“We have some work to do ahead us,” Greg Doud, a Chief Agricultural Negotiator, said, “but I would say overall in the vast majority of the implementation of the Phase One Agreement, I am very pleased.”

According to the AFBF, China purchased $5 billion dollars of U.S. ag goods in the first quarter of 2020. As we previously reported, China’s asking food processors to increase grain and oil seed inventories. If there is a breakdown in global supply chains, like Brazil, the move will protect domestic crop and meat supplies.