U.S. President Donald Trump won't unilaterally scrap a phase-one trade deal with China signed Jan. 15 because he needs American farmers to vote for him Nov. 3, according to an expert on China.
Trump won't walk away from the deal because he needs farmers' votes, according to senior adviser and trustee chair in Chinese business and economics at the Center for Strategic and International Studies Scott Kennedy says. Trump won't junk phase one because "it's the only reason the Chinese are buying agricultural goods from farmers in red states that the president needs for re-election."
China may never buy the agreed amounts of U.S. goods and services under phase one of the trade deal because of the immense economic damage inflicted by the COVID-19 pandemic on China and its international markets, Kennedy said. He said China had fallen far short of its phase-one commitments.
"If it's really based on the genuine commitments that they inked in January they're far behind and they're never going to catch up," he said.
Kennedy said Trump's battle with China had morphed from one about trade into a "fundamental strategic competition" where both countries were "portraying the other as an existential threat" to their existence.
Nevertheless, Trump could change his mind and scrap phase one, he added. Trump hinted at this possibility last week when he said the phase-one trade deal "means very little in the overall import of things."
Trump is trailing in recent election polls. American farmers are supporters of the Republican Party and voted heavily for Trump in 2016. But Trump's trade war with China launched 2018 has inflicted economic pain on this important voting bloc.
In May, data from U.S. courts showed year-to-year farm bankruptcies rose 23 percent. A report from insurance company and lobby group American Farm Bureau Federation shows 627 filings during the 12-month period ended March. It was the fifth consecutive year of increases in bankruptcy filings by family farmers or fishermen with regular annual income - otherwise known as Chapter 12 bankruptcy. The report shows bankruptcies accelerating since January and most attribute the increase to the trade war with China.
The trade deal's phase one is a temporary cease-fire. Phase one requires China boost purchases of U.S. goods and services by $200 billion from 2020 to 2021 compared with 2017 levels of $130 billion in goods and $56 billion in services. China also suspended planned retaliatory tariffs. It reduced tariffs on $75 billion worth of goods Feb. 5.
The U.S. reduced import tariffs to 7.5 percent from 15 percent on $120 billion in goods from China effective Feb. 14. The 25 percent U.S. levy on $250 billion of goods from China remains, however.
