China to buy $50B in US farm products in return for tariff concessions: US sources

Farmers need to be cognizant of several basic things when planting soybeans every year, no matter the soil or weather conditions. (Photo: Joseph L. Murphy/Iowa Soybean Association). Sketched by the Pan Pacific Agency.

WASHINGTON D.C., Dec 13, 2019, Reuters. The White House has agreed to suspend some tariffs on Chinese goods and reduce others in return for Beijing’s pledge to hike purchases of US farm products in 2020, sources said on Thursday (Dec 12), taking a step towards de-escalating the trade war between the world’s two biggest economies, The Straits Times reported.

A source briefed on the status of bilateral negotiations said the United States would suspend tariffs on US$160 billion (S$216.3 billion) in Chinese goods expected to go into effect on Dec 15 and roll back existing tariffs.

In return, Beijing would agree to buy US$50 billion in US agricultural goods in 2020, double what it bought in 2017, before the trade conflict started, two US-based sources briefed on the talks said.

The White House didn’t release any official statement, raising questions about whether the terms had been agreed by both sides.

Two people familiar with the negotiations had said earlier on Thursday that US negotiators were offering to cut existing tariffs on Chinese goods by as much as 50 per cent as well as suspend new tariffs that were scheduled to go into effect on Sunday in an attempt to secure a “Phase 1” deal first promised in October.

The US-China trade war has slowed global growth and dampened profits and investment for companies around the world.

The US has announced US$28 billion in subsidies for farmers who are impacted by the trade war.

China bought US$24 billion in US farm products in 2017, before the trade war started, according to US Department of Agriculture figures.

“If signed, this is an encouraging first phase that puts a floor under further deterioration of the bilateral relationship,” said US-China Business Council President Craig Allen. “But this is just the beginning. The issues facing the US and China are complex and multi-faceted. They are unlikely to all be resolved quickly.”


Mr Trump said in a White House news conference on Oct 11 with Chinese Vice-Premier Liu He that the two countries had agreed to a Phase One trade deal on “intellectual property, financial services” and a “purchase of from US$40 billion to US$50 billion worth of agricultural products”.

A written agreement would be available in weeks, Mr Trump said then, adding: “We’ve agreed in principle to just about everything I mentioned, all of the different points.”

However, Beijing has balked at committing to buying a specific amount of agricultural goods during a certain time frame. Chinese officials said they would like the discretion to buy based on market conditions.

After the October news conference, analysts questioned whether the US$50 billion figure was realistic.

Soybeans made up half of China’s agricultural purchases in 2017. Demand has since cratered because the pig herds that eat it have been decimated by African swine fever.

Officials from China have demanded the US roll back tariffs that Mr Trump put in place as a condition of any Phase 1 deal.

The Trump administration put tariffs on hundreds of billions of dollars in Chinese imports, starting in July 2018.

Although there appeared to be an agreement in principle, it was unclear whether it was a written, actionable deal, or whether Beijing had agreed to it, said one Washington-based source familiar with the talks.

“Until the full text is released, it’s not particularly actionable. It’s very unclear to me: Is this an agreement in principle or is it an agreement?” the source said.


If Mr Trump does not suspend the tariffs scheduled to go into effect on Sunday, Beijing officials will apply more tariffs on US goods and may suspend talks until after the US presidential election in November 2020, trade experts believe.

The Dec 15 tariffs would apply to almost US$160 billion of Chinese imports such as video game consoles, computer monitors.

In August, China said it would impose 5 per cent and 10 per cent in additional tariffs on US$75 billion of US goods in two batches.

Tariffs on the first batch kicked in on Sept 1, hitting US goods including soybeans, pork, beef, chemicals and crude oil.

The tariffs on the second batch of products are due to be activated on Sunday, affecting goods ranging from corn and wheat to small aircraft and rare earth magnets.

China also said it will reapply on Sunday an additional 25 per cent tariff on US-made vehicles and 5 per cent tariffs on auto parts that had been suspended at the beginning of 2019.

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