China on Wednesday made its first major purchases of U.S. soybeans since President Trump and President Xi Jinping struck a trade war truce earlier this month at the recent G20 Summit, according to a report from Reuters. The purchase provides some relief to U.S. farmers who have struggled to find buyers for their record-large soybean harvest.
The soybean purchases by Chinese state-owned companies is valued at more than $500 million. However, the purchases will do little to reduce the $43.1 billion U.S. trade deficit with China, which President Trump wishes to narrow over the long term.
It has been reported that the soybean purchases will provide a goodwill gesture before the next round of U.S-China talks to change their terms of trade. The United States has a long list of complaints against China on intellectual property, forced technology transfers and industrial subsidies.
The soybean exports will provide some relief to U.S. farmers. Soybeans are the single most valuable U.S. agricultural export product and China bought 60 percent of those exports in 2017, worth $12.25 billion. But China has been out of the market since Beijing imposed a tariff on U.S. soy imports in July, pushing soybean prices to decade lows.
President Trump told Reuters in an interview on Tuesday that the Chinese were already buying a “tremendous amount” of U.S. soybeans and would also soon cut tariffs on U.S.-made autos and car parts.
The purchase of over 1.5 million tons of soybeans is the most concrete evidence yet that China is making good on pledges the U.S. government said XI made when the two leaders met on December 1 and agreed to a 90-day detente to negotiate a trade deal.
Global markets have seesawed since then with little sign that China was making the substantial purchases of U.S. farm, energy and industrial products that President Trump said would start immediately after the meeting. Investors has been skeptical about the progress made toward ending a trade war that has disrupted the flow of hundreds of billions of dollars of goods between the United States and China, the world’s two largest economies.
The arrest in Canada of a top China executive from technology giant Huawei Technologies also stoked concern in markets that the trade war could worsen. However, in another sign of concessions to the United States, China appears to be easing its high-tech industrial push called “Made in China 2025,” which has irked Washington.
“This is a start,” said Valley City, North Dakota farmer Monte Peterson. “Any business that we can put together we’re pretty grateful for.”
Meanwhile, the White House this week delayed additional payments from a $12 billion aid package for farmers stung by the trade war because it expects Beijing to resume buying U.S. soybeans. Commodities traders and analysts said soybean prices may struggle to build on this week’s gains unless China buys considerably more soybeans.
The 25 percent tariff on U.S. soybeans Beijing imposed on July 6 remains in effect. The higher duties discouraged private Chinese importers from making purchases as Brazilian soybeans, which are not subject to tariffs, are less expensive. China this year has relied on Argentina and top exporter Brazil for most of its soybeans
