As Democrats on stage at the presidential debate took their shots at Donald Trump’s trade strategy with China, it looks as though it has begun producing some results. In a surprise move, Beijing announced that it would roll back tariffs on key agricultural products ahead of next week’s initial trade talks. China had targeted pork and soybeans in order to put pressure on Trump through his rural voter base, but appear to have reversed course:
China will exempt some agricultural products from additional tariffs on U.S. goods, China’s official Xinhua News Agency said Friday, in the latest sign of easing Sino-U.S. tensions before a new rounds of talks aimed at curbing a bruising trade war. …
“China supports relevant enterprises buying certain amounts of soybeans, pork and other agricultural products from today in accordance with market principles and WTO rules,” Xinhua said, adding that the Customs Tariff Commission of China’s State Council would exclude additional tariffs on those items.
China has “broad prospects” for importing high-quality U.S. agricultural goods, Xinhua reported, citing unnamed authorities.
Part of this is motivated not so much by trade pressures but domestic problems at home. As Reuters notes, a swine-flu epidemic has forced domestic pork prices to skyrocket. China can’t produce enough to meet demand, and the last thing they need right now is more unrest at home to go along with the uprising in Hong Kong.
However, extending that to soybeans might be more of a trade-war blink:
China is also expected to step up purchases of soybeans, historically the most valuable U.S. farm export which China has largely avoided buying since the trade war began last year.
Before the announcement of additional tariff exemptions, Chinese firms bought at least 10 boatloads of U.S. soybeans on Thursday, the country’s most significant purchases since at least June.
One has to wonder whether that reflects production problems at home, too. Either way, it will make American farmers happy, while at the same time taking the pressure off American negotiators. China’s concessions now go deep into the heart of their leverage in those talks.
This follows a grudging concession by Trump yesterday that he might consider an interim trade agreement to ease tensions, but he’d prefer to wait for a full settlement:
The president told reporters he would like to ink a full agreement with the world’s second largest economy. However, he left the door open to striking a limited deal with Beijing.
“If we’re going to do the deal, let’s get it done,” he told reporters as he left for a congressional Republican retreat in Baltimore. “A lot of people are talking about it, I see a lot of analysts are saying an interim deal — meaning we’ll do pieces of it, the easy ones first. But there’s no easy or hard. There’s a deal or there’s not a deal. But it’s something we would consider, I guess.”
Trump’s statements add to confusion sparked earlier in the day about what the White House would accept in its ongoing negotiations with China. U.S. stock indexes initially climbed on a report that the Trump administration talked about crafting an interim agreement. A White House official then said the U.S. is “absolutely not” considering such a deal, causing markets to give up some of those gains.
Asked to clarify if Trump’s position had changed from earlier in the day, White House spokesman Judd Deere emphasized the president’s comment that he would prefer a complete agreement.
On Wednesday, Trump delayed the next round of tariffs from October 1 to October 15, calling it a “gesture of goodwill.” The move allows Xi Jinping to celebrate the communist government’s 70th anniversary without the hike as context, but more practically allows a little more time for negotiations. That also puts a damper on the “interim” idea, as it would still likely lead to significant tariff increases on goods outside whatever partial pact is made.
The concessions on pork and soybeans are significant, much more so than a two-week delay in tariffs. It signals that China can’t afford to deal with a lengthy trade war, especially not this year. They may not like it, but they still need to trade in order to feed their massive population, and China might have to get used to fully opening their markets and complying with agreements to do so.