Trade Breakthroughs With China May Take Time

Agriculture markets continue to wait for significant trade deals with numerous countries to be agreed upon and signed, not the least of which is China. What is happening in talks since the U.S. and China announced that 90-day tariff pause on May 11?

“A lot of the talks are happening at lower levels and that’s not really the level at which you get a trade agreement,” says Arlan Suderman, Chief Commodities Economist at StoneX.

There are still tariffs in place and those make it difficult for U.S. commodities to flow into China unless they allow a waiver based on needed imports.

“Overall, I think China is going to be slow walking these talks. I do expect more talks to happen. The phase one trade agreement in Trump 1.0 took 13 face-to-face meetings. This one may not take as many meetings, but they may be strung out over a long period of time. I think President Xi Jinping currently sees some advantage to playing the long game here and trying to wait out President Trump hoping that he won’t have to give up anything in negotiations.”

Suderman attributes that stance to China’s bet that U.S. domestic pressure may cause the Trump administration trade war stance to fall apart. Another factor is Xi’s immense popularity at home.

“And that’s because the message is controlled in China, and the Chinese people have been told that for years the United States has been the country with the unfair trade practices and that the United States is the bully in the world, and that the United States has declared war on China,” he explained. “So similar to the World War II where Americans rallied around the cause of righteousness and were willing to sacrifice for the cause, Chinese people are willing to sacrifice because they see their leader Xi Jinping as the only world leader willing to stand up to the so-called bully.”

The support for the Chinese leader allows him to buy time, and thus Suderman expects achieving an agreement could take “quite some time.”

Suderman says retailers here are in a rush right now to restock with lowered tariffs. Chinese manufacturers have ramped up production and reports say bookings from China to the United States since the May 11^th announcement may have quadrupled.

Hear more from Suderman on the current status of the Chinese economy: