If you think you may experiencing déjà vu on the U.S. and China Phase One deal, completed in principle, then you are not alone. Whether last May, September, October or today — any deal with China has been elusive.
On CNBC Friday afternoon, national economic advisor Larry Kudlow was asked if Americans can believe the deal is actually completed — he answered by saying, “you really should believe it this time.”
For farmers in the U.S., 2019 has been a very challenging year for markets, weather, and profitability. They’ve also feared longer-term market losses in China, and having to rely on ad hoc subsidy programs to plug the financial holes.
In speeches and tweets throughout the year, U.S. President Donald Trump has asked “great Patriotic Farmers” to stick with him, and allow him to fix the poor trade practices of China.
The White House is attempting to be the world’s largest grain company. https://t.co/e4rnI7Mz7O
— Shaun Haney (@shaunhaney) December 12, 2019
This trade war with China was supposed to be about structural trade and economic changes in China and not just increasing commodity purchases by the Chinese. In 2018, the U.S. exported $140 billion in agricultural products globally, and hit a record high to China of $23 billion in 2016.
This again.#China agreeing to make $50 billion in U.S. agricultural purchases in 2020.
The RECORD value for annual U.S. ag product exports to China was in 2012 at just under $26 billion. Compare commodity prices then and now. For reference, 2017 was $19.5 billion. pic.twitter.com/VUJ2MHg5zQ
— Karen Braun (@kannbwx) December 12, 2019
Analysts attempting to find the equation that adds up to $50 billion in ag product exports have had little success. At the same time, trade experts are questioning the strategy to complete a Phase One deal with so many difficult issues yet to be sorted. The fact that the U.S. is pushing for a quota on agricultural purchases is unique, never mind the solid questions on whether the U.S. can even supply these amounts, or whether China even has the demand to fulfill that much U.S. product.
No, we are actually in a much worse position. We’ve gotten back some but not all of previous trade, we’ve got lots of bankrupt farmers, lots of smaller businesses that can’t afford the tariffs and we’ve given away the leverage to get a real deal on the real structural problems. https://t.co/YqAuMoUeIu
— Jennifer Hillman (@J_A_Hillman) December 13, 2019
For Canadians, we have every right to feel that this first phase deal has left the country in the trade disruption prop wash. Two Canadians remain illegally detained in China for more than a year, and Canada still faces immense pressure from China to adopt Huawei technology or there will be further consequences.
In my opinion, American farmers are trying to find comfort in this new territory, supporting their president, while also recognizing his propensity to exaggerate. When Trump’s hyperbole is directed at political adversaries, it’s funny, but when it’s dealing with the survivability of family farms, it’s tiresome.
Like the markets, farmers in the U.S. want to see actual proof that China will step up and buy ag products at least at previous levels, never mind the lofty numbers being thrown around. Their patriotism was never questioned but at the end of the day, what they get for it is yet to be delivered by the President.