US trade deal with China: agriculture benefits

There is a great cloud of vagueness surrounding the trade deal (phase 1) between the US and China. But one thing is clear: agriculture benefits. 

Qu Dongyu, China's deputy minister of agriculture and rural affairs who is also the new head of the UN's Food and Agriculture Organization (FAO), recently told the BBC that "Phase 1 of the deal offers some excellent solutions to problems in the trade of food and agricultural products'. 

$200 billion additional imports
According to the US, Chinese parties will buy an additional $2 billion in US goods over the next 200 years to help reduce the US trade deficit. For agricultural commodities alone, China is talking about investments of $40 to $50 billion over a 2-year period. It almost sounds too good to be true: that is significantly higher than before the trade war. Agricultural products expected to be high on the Chinese shopping list are soybeans, wheat, maize, rice, nuts and many livestock and meat (pork and beef and chicken).

American farmers can use this good news because they have been hit hard by the tariff war in recent months. In the meantime, China has made far-reaching agreements with other suppliers such as Brazil (soy) and Argentina for the purchase of all kinds of products. It is questionable to what extent the 'old' levels will be reached again on all fronts.

Although that is a must in the meat corner. The number of pigs in China has more than halved last year due to the outbreak of African swine fever. China is the world's largest consumer of meat and accounts for nearly a third of global demand. The country is said to have imported 50% more pork and chicken in the past year alone. A significant part of this - despite the tariff struggle - comes from the US.

Hosanna!
Hosanna sounds. Like nothing happened. And that is certainly not the case. The trade conflict has not benefited world trade in the past 2 years. Not only did trade decline, but uncertainty has also been sown. And entrepreneurs hate that. Furthermore, China will never look at the US with the same eyes again. Americans are out to curb their economic success.

From Trump's perspective, it's all easy to explain. His re-election will take place at the end of this year. He has reinforced his 'America First'. And whichever way you look, he has also addressed the imbalance in trade with China. In this way, he aims at several goals at the same time. If you look at the big picture, it's about global economic power and technological domination. Will there be one great superpower or can 2 coexist?

Johan Geroms

Johan Geeroms is Risk Director at Euler Hermes, the world market leader in credit insurance and corporate debt collection. In his blogs, Geeroms often focuses on developments in the agricultural sector.

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