Kudlow: We “Hope” China Will Buy Soybeans

Written by SK Ashby

When Trump delayed his decision to increase tariffs on over $200 billion in Chinese goods from 10 to 25 percent in November of 2018, he claimed that China would immediately resume large-scale purchases of American agriculture.

When Trump delayed his decision to impose tariffs on over $300 billion in Chinese goods in June of 2019, he claimed the same thing; that China would immediately resume purchases of American agriculture.

What was billed as some sort of guarantee has now been downgraded to a "hope" by Trump's top economic adviser Larry Kudlow.

Kudlow told an event hosted by CNBC that U.S. President Donald Trump had agreed during a meeting last month with Chinese President Xi Jinping not to impose any new tariffs, but China was expected to move ahead with “good-faith” purchases of U.S. agricultural products, such as soybeans and wheat.

President Xi is expected, we hope in return for our accommodations, to move immediately, quickly, while the talks are going on, on the agriculture (purchases),” he said. “That’s very, very important.”

The problem here is that this is not how anything works.

Chinese importers are not buying American farm goods because retaliatory tariffs placed on those goods make them prohibitively expensive or, at very least, significantly less attractive than imports from other nations.

Chinese importers are not going to purchase American farm goods until those tariffs are lifted and President Xi Jinping is not going to lift retaliatory tariffs on American goods until Trump lifts his own tariffs. And in case anyone forgot, Trump wants to make some of his tariffs permanent.

For imports to resume right now, Jinping would have to order importers to pay more money for American farm goods for political reasons and with nothing to show for it.

My interpretation of recent events is that China has tentatively agreed to resume large-scale purchases of American goods when talks are complete and all tariffs have been lifted. But that would only be natural. That's how trade works. They aren't going to go out of their way to please Trump or the farmers that voted for him before they have a real agreement.