People close to the ongoing trade talks have revealed that China may be planning to increase its purchase of US agricultural products by as much as US$30 billion per year. The products will reportedly include corn, wheat, and soybeans, and it could be part of a possible new trade deal being negotiated by both countries.
The offer is reportedly part of a new memorandum of understanding that would be conducted for an unspecified amount of time. When asked about the offer, the United States' Agricultural Secretary, Sonny Perdue, mentioned that it was still too early to confirm on how much China is really willing to add as part of the deal.
Perdue also stated that he really didn't want to raise any expectations as the talks are still underway. He did, however, say that if a deal is reached, it would definitely help the particular sector recover almost immediately. Corn and soybean futures immediately jumped up in response to the rumors.
To get the ball rolling, both countries would have to first agree on removing specific tariffs and barriers. There also needs to be a commitment from both sides and the key would be proper enforcement. Some analysts are still skeptical of the deal as China and the United States have been known to lay down a lot of promises that are often not kept. China has previously offered to increase its purchases and for the most part, it has resumed large imports of farm goods from the United States.
Sources close to the ongoing talks have also revealed that part of the deal will include the removal of non-tariff barriers, such as intellectual property rights and technology transfers. It is not yet clear how exactly it will all pan out, but it is likely that all the barriers will be put up once again if not all of the conditions are met.
The United States currently is a good position to increase its imports of farm goods to China given the recent price increase from alternative sources such as Argentina and Brazil. In 2017, China purchased a total of US$24.2 billion of farm products from the United States. This quickly declined when China imposed its own tariffs in retaliation to the United States' reduction in Chinese imports. If the United States can offer a good deal to China, the country may retract those tariffs and increase its imports to a similar scale as its imports in previous years. If that does not happen, China may have no other choice but to approach alternative sources to serve their demand. The United States, on the other hand, may have to settle with selling their supply to Europe and the Middle East.
