An Urban's Rural View

I Gave the China Trade Deal Two Cheers. Was it Really a "Nothing-Burger?"

Urban C Lehner
By  Urban C Lehner , Editor Emeritus
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China's growth has slowed to the lowest annual rate in decades, but that rate is still pretty fast by most countries' standards, and not all the slowing is tariff-related.(DTN photo by Chris Clayton)

The pundits haven't been kind to Donald Trump's "phase-one" China trade deal. The president ballyhooed it, promising $40 billion to $50 billion in purchases of U.S. ag products. Many pundits dismissed it.

My own initial reaction was "two cheers." (…). I withheld the customary third cheer because the deal seemed vague and preliminary, with lots of negotiating still to be done.

Others were much more skeptical. "Another U.S.-China No-Deal Deal" was how Mary Lovely of the Peterson Institute for International Economics described it (…). "A nothing-burger," said Scott Kennedy at the Center for Strategic and International Studies (…).

Long-time China hand Jim McGregor, China chairman of APCO Worldwide, was particularly skeptical of the promised Chinese ag-buying binge: "This $50 billion in agriculture -- there was $9 billion in American farm goods exported to China last year. We're going to bring that up to 50 billion? What are they going to do? Build soybean mountains around different cities in China?" (…)

Some ag people also got into the act. When Bloomberg ran a headline saying China was tying big ag purchases to an actual reduction in U.S. tariffs, and not just no new ones, Farmers for Free Trade tweeted: "Shocking! You mean China's not going to buy $40-50 billion in ag products until our tariffs are lifted? Couldn't have seen that one coming . . . " (…)

With so many Americans voicing skepticism, it's worth looking at what China has said. If I had to sum it up, I'd say the Chinese have neither endorsed nor contradicted Trump's ballyhooing. They've been artfully dodging.

For example, they've been hesitant to use the term "deal." A government spokesman did agree the two countries are "on the same page" -- without specifying what page it is. (…)

On the critical -- to farmers and ranchers -- question of the $40 billion to $50 billion, the dodging has been especially artful. At times the Chinese have insisted their buys will depend on market prices and domestic demand. At other times they've been more encouraging, while stipulating that it all depends on the terms of the final deal.

Bloomberg quoted non-named somebodies in Beijing hinting that in the final deal China might agree to $20 billion in year one -- roughly in line with pre-trade-war totals -- and maybe a big jump to $40 billion to $50 billion in year two if Trump gives them enough tariff reductions. (…)

My bottom line hasn't changed. Until there's a signed agreement on paper, it's at best a two-cheer deal. But I wouldn't write it off as a pipedream.

The president hopes there could be a signed agreement on paper by mid-November. (…) If anything is standing in the way of that happening, it's probably the lingering conviction on each side that the other is more desperate for a deal.

Trump seems convinced his tariffs are inflicting unbearable economic pain. But are they? China's growth has indeed slowed to the lowest annual rate in decades, but that rate -- 6% -- is still pretty fast by most countries' standards, and not all the slowing is tariff-related. That's not to say the Chinese don't want tariff relief; it would undoubtedly give their economy a boost. It's to question how desperate they are. McGregor thinks the answer is not very. The White House, he says, "is still pretty delusional."

For their part, the Chinese see Trump going into an election year facing an impeachment proceeding. They could be forgiven for thinking Trump would do anything for a deal. No doubt he'd love one, it would certainly help him with the farm-state vote. But the Chinese may underestimate his ability to live with failure. He might even try to convert a no-deal to points with the electorate: "You need a tough president like me who is willing to say no to a bad deal."

There remains then, it seems, serious potential for miscalculation. The Chinese, though, may have made the better assessment. For Trump has already made a major concession by agreeing to negotiate in phases, as they have long desired.

The first-phase negotiation, the one that may or may not get wrapped up in November, is mainly about Chinese ag purchases and American tariff relief. The really tough issues, like extortion of American companies' intellectual property and subsidies to state-owned companies, have been put off until a later phase.

The Chinese, naturally, have no interest in getting to that phase, and if we do ever get there they'll bargain tough. A deal may prove unobtainable. Farmers and ranchers should be happy they're in phase one.

Urban Lehner can be reached at



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10/30/2019 | 7:41 AM CDT
Soybeans are going to be this decades wheat from the 80's. I wrote this on an earlier blog 12 months ago and it is now coming to fruition. Tariffs are a pseudo-trade embargo. Recall how that went 40 years ago. As far as tough on China, let's not forget that our American Companies chose to go over there with there production knowing full well what the rules were and were going to be. It is us who allowed the theft to continue. The current administration is using tariffs to improve one area of the economy at the expenses of another (who is < 2% of the electorate) choosing to throw money at us to ameliorate our financial pain. How about policies that promote all sectors of the economy driving research and innovation to out compete the world like we did in the 60's and 70's. If we truly believe in America to make America great, then we don't need punitive measures to be the best. Let's get in a war of innovation. Everyone wins then. ( jjhoelzer1)
Glenn Sears
10/28/2019 | 12:00 PM CDT
I believe the Chinese are wait and see program, primarily due to the fact that China is waiting to see what happens in the election. If Trump gets reelected then its game on, however if it goes back to the democrats it is going to go back to the way it was. Not really though, when you loose 75% of your hogs it has a lasting effect of a perfect storm and quite honestly they do not need our beans at this point. They can purchase all they need right now.
10/26/2019 | 12:39 PM CDT
Like most farmers I'm very concerned about the impact that the trade war is having on the economic health of American farmers. Past Presidents have simply given verbal scoldings that have allowed the Chinese to continue to be more aggressive in taking advantage of American companies. But as I read many opinions and commentaries about the tactics and potential for success of Trump's efforts I find it quite dismaying that so many seem to be almost hoping for his failure in this trade arena. The bitterness against this unconventional President has clouded the views and loyalties of many of these authors so that their first desire is to see Trump fail even if it means economic hardship for millions of American. How sad!