Under "phase one" of Trump's "biggest and greatest" deal ever, China was supposedly going to more than double their imports of American farm goods between this year and next, and while that was never likely, it's almost certainly not going to happen now.
China's economy was already sinking, and consumer demand was already low, before the outbreak of coronavirus so any plan that called for a dramatic increase in imports would rely on state purchases made directly by the Chinese government.
China's ruling party is now telling their state-controlled importers to stop buying American farm goods according to Bloomberg.
Chinese government officials told major state-run agricultural companies to pause purchases of some American farm goods including soybeans as Beijing evaluates the ongoing escalation of tensions with the U.S. over Hong Kong, according to people familiar with the situation.
State-owned traders Cofco and Sinograin were ordered to suspend purchases, according to one of the people, who asked not to be identified discussing a private matter. Chinese buyers have also canceled an unspecified number of U.S. pork orders, one of the people said. Private companies haven’t been told to halt imports, according to one of the people.
Bloomberg and Reuters both report that the Chinese government is pausing their purchases while they evaluate relations following Trump's decision to impose more sanctions on Chinese-owned telecommunications company Huawei combined with Trump's threat to repeal the privileged trade status of Hong Kong.
I believe it was just a matter of time until this happened and I also believe it would have happened even if there was no coronavirus pandemic.
Trump and his advisers have both said his "greatest deal" is no longer as important to him as punishing China for the pandemic, but Trump would have lost patience or interest in his own deal in any event because he needs enemies to run against in the presidential election. That's why Trump would never agree to actually eliminate any of his existing tariffs; he wanted to keep the trade war going for political reasons.
The Trump White House will probably say China is breaking the deal, but that is only technically true; not spiritually. Signing a deal in the first place came at a political cost and Trump has made it politically untenable to abide by it; first by claiming China created the coronavirus to now sanctioning the operations of Chinese-owned companies even outside the United States.
It's not that China is completely innocent. It's just that everything Trump touches turns to shit.
The market isn't lighting its hair on fire today -- at least not yet -- because the inevitable failure of Trump's deal is already baked in.
“The market has already seen the deteriorating relationship between the China and the U.S. and many think that with the slow progress of Chinese commodity buying so far, the trade deal’s future was already in jeopardy,” said Michael McDougall, a managing director at Paragon Global Markets in New York.
It occurs to me that Trump is creating conditions that could make it difficult for a Democratic administration to hit the reset button on even without another four years to permanently destroy our relations.