“they believe it’s doable”

JM Ashby
Written by JM Ashby

Given that China only purchased about $20 billion in American goods at the peak of trade relations before Trump launched his trade war, it would be quite fantastical if China purchased more than double that in 2020, wouldn't it?

Trump and his advisers have long claimed that China would purchase between $40 and $50 billion in farm goods as part of the "greatest and biggest deal ever," but Trump's top economic adviser Larry Kudlow appeared on CNBC where he admitted that the purchases would occur over two years. He also implied that it's not guaranteed.

Stocks posted small moves on Friday after investors learned the details of the phase one trade agreement. As part of the deal, China will purchase $40 billion in U.S. agricultural products.

However, Kudlow said those purchases will be made over a two-year period.

"The sense we got from the Chinese is they believe it's doable. They've been in the market buying ag and other commodities let's say as goodwill," he said.

I don't believe China will purchase this much over two years because I don't believe Trump will make it through the 2020 campaign without escalating, but even if we accept that China will purchase $40 billion over two years, that would mean they aren't buying any more than they already did before Trump started a war.

To say that China believes it's "doable" to purchase this much is an indication that China has committed to buying what consumer demand and market conditions allow for; it's not a hard commitment to buying a specific dollar amount.

Trump's two bailouts for American farmers have already cost more than half of what they claim China will import over the next two years and the bulk of Trump's tariffs (and China's corresponding retaliatory tariffs) will remain on the books.

I don't see how this is going to change anything for anyone; good or bad. Instead, it appears to enshrine the status quo of permanent tariffs.

  • muselet

    In other words, Chinese negotiators hinted that it wasn’t entirely beyond the realm of possibility that China might purchase the same dollar amount of US agricultural products as it did before Donald Trump blew up Sino-American relations on a whim, and it might do so for two years running.

    Wow. What a remarkable deal. The greatest and biggest ever, one might say. 🙄

    And remember, this is coming from Larry Kudlow, a man renowned for his ability to be spectacularly wrong about almost everything.

    Erm …

    If history is any guide, Trump will need a distraction (or will crave attention) within a month or so and will impose yet more—and/or yet higher—tariffs on imports from China. Whether the distraction is from impeachment or not remains to be seen.