January 16, 2020

US-China phase one trade agreement signed, confirms China's US agriculture purchases

The United States and China have signed a phase one agreement, ending an 18-month trade war that will roll back some tariffs and increase China's US agricultural purchases, reported Reuters.

The focus of this deal is China's pledge to purchase additional US$200 billion worth of US goods and services in the span of two years. This is higher than the US$186 billion in purchases China made back in 2017.

According to a deal document released by the White House, China will purchase US$32 billion more in US agricultural products.

However, Chinese Vice Premier Liu He said Chinese companies will purchase US$40 bullion in US agricultural products every year until 2022 depending on market conditions. During the trade war, China did not commit to purchasing US agricultural goods and switched to Brazil as a source for soybeans.

Soybean futures hit a 0.4% drop during the signing of the phase one deal and fell lower after remarks from Vice Premier Liu, an indication that traders and farmers were concerned regarding China's purchasing goals.

Michelle Erickson-Jones, farmers for free trade spokeswoman said the new phase one deal doesn't life retaliatory tariffs on US farm exports and makes farmers more dependenton China government-controlled purchases.

Analysts have doubts as to whether China can switch import sources to the United States from current trading partners.

China's state-run CCTV said the new phase one deal will meet increased demand for pork, beef, poultry, dairy and processed meat.

US President Donald Trump said remaining tariffs will be abolished once both sides complete negotiations on a phase two agreement. US Vice President Mike Pence said phase two deal negotiations have already begun.

-      Reuters