It’s been almost ten months since the signing of the first phase of a trade agreement between the United States and China. In the lofty deal, China pledged to buy an additional $200 billion in goods and services over two years. Since its signing, President Trump has repeatedly touted the deal on the campaign trail, citing its benefits for the agriculture sector in particular.
But according to the most recent public data available, China is falling short on its purchases.
“Overall, it’s incredibly unlikely for China to be able to meet the goals,” says Chad Bown, Senior Fellow at the Peterson Institute for International Economics.
Bown estimates that China had only reached 53% of the expected purchase target through the end of September.
“They would have to buy a lot of aircraft in the last three months of 2020. You know, big-ticket items like that,” he says. “They would have to buy a lot of soybeans.”
The phase one agreement was ambitious to begin with, and some trade experts have doubted China’s ability to fulfill its targets from the start. But 2020 has also brought with it a myriad of roadblocks.
While agriculture is one of the most mentioned parts of the deal, the largest slice comes from manufactured goods. That includes things like airplanes, which have historically been the largest U.S. export to China. Bown says once Boeing grounded their 737 MAX airplanes after multiple crashes, China halted its purchasing of those planes.
In terms of agricultural goods, it’s all about soybeans, says Bown.
“The story is, if you don’t get there with soybean sales, you’re not going to get anywhere near the total agricultural commitments,” he says.
So far, he says China is lagging on its soybean purchasing, at only about halfway to its purchasing target.
Surprisingly, while the COVID-19 pandemic has contributed to the agreement’s shortcomings, it hasn’t been a dominant factor. It has affected it in surprising ways, including by boosting the export of certain items such as medical supplies.
“The pandemic… surely has been bad, but there are some sort of silver linings even in the world of trade when it comes to the pandemic,” Bown says.
Last week, the U.S. Trade Representative and the U.S. Department of Agriculture released a report highlighting the trade agreement’s progress.
“This China Phase One Agreement is proof President Trump’s negotiating strategy is working,” said U.S. Secretary of Agriculture Sonny Perdue. “While it took China a long time to realize President Trump was serious, this deal is a huge success for the entire economy.”
Trade expert Chad Bown says the report utilized “optimistic” numbers, that is, numbers based on contracts rather than deliveries.
Ultimately, it’s impossible to say how the trade agreement — success or failure — will impact President Trump’s reelection chances. Agriculture is inextricably linked to the deal, and Bown says with agriculture’s outsized role in American politics, the outcome very much remains to be seen.
“This is going to be a very complicated election, and just how much trade has to do with it is one of many, many factors,” he says. “I think we’ll probably have to wait and see and assess all of that after Election Day.”
Follow Dana on Twitter: @DanaHCronin
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