China’s commitment to purchase U.S. farm items based on “market situations” during the Phase 1 trade agreement signing ceremony Wednesday added to doubts among farmers and commodity traders over Beijing’s lingering tariffs on U.S. exports.
The agreement, meant to reduce tensions after two years of tariff row, included China’s commitment to purchase around $12.5 billion worth of agricultural items in 2020 and at least $19.5 billion over the 2017 level of $24 billion in 2021.
President Donald Trump’s emphasis on a significant commitment to purchase farm merchandise was a major sticking topic in discussion leading up to the signing, people briefed on the talks stated, as China wished the freedom to purchase based on demand.
Chinese VP Liu He, standing beside Trump, said Wednesday that Chinese companies would purchase American products “based on market conditions.”
Following the remark, the price of soybeans, the top U.S. farm product shipped to China by value before the commerce war, fell to a one-month low on the Chicago Board of Trade futures market SH0.
Ted Seifried, a chief strategist with brokerage Zaner Group in Chicago, stated a lack of specific purchase contracts was also disappointing.
U.S. soybean suppliers will continue to face stiff competition for sales to China from a probable record-large Brazilian crop, which farmers will begin harvesting in the coming weeks.
The settlement didn’t reduce tariffs on major U.S. agricultural exports to China, although Trump stated tariffs would come off in a Phase 2 settlement. Pork is subject to a 68% duty even as China wants more imports due to the devastating epidemic of deadly pig disease.