By Jeffry Bartash, MarketWatch
The biggest trade-talk snag between Washington and Beijing in averting further tensions is over the world’s second-largest economy’s degree of commitment to buying more U.S. farm products.
President Donald Trump wants China to agree to purchase $50 billion annually in U.S. farm products such as soybeans and pork. He sees it as a hard target in the longstanding negotiations.
Chinese representatives have said they are willing to buy more farm goods from the U.S., but view the $50 billion figure as a soft goal. Even before the trade tensions boiled over in 2018, Chinese purchases of U.S. farm goods totaled $20 billion a year.
How Beijing and Washington span that divide will determine if the Trump administration delays another round of tariffs on Chinese goods that were set to go into effect Dec. 15. or eliminates them altogether. The U.S. is scheduled to slap a 15% tariffs on about $160 billion in consumers goods such as toys, clothes, computers and cellphones that have thus far been shielded from the tariff conflict.
However, five days before the Sunday deadline, the White House is still sending mixed signals.
On Tuesday, Acting White House chief of staff Mick Mulvaney said prospects for “phase one” of a broader trade compromise with China were “pretty good” during a Wall Street Journal CEO Council event in Washington.
Yet the president’s top economic adviser and key confidante, Larry Kudlow, moments later at the same event said the Dec. 15 tariffs were “still on the table.” He declined to confirm a Journal report that negotiators were “laying the groundwork” to delay them.
Meanwhile, stocks have been bouncing around amid the conflicting narratives. Still, trade in the Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.36% and S&P 500 index /zigman2/quotes/210599714/realtime SPX +0.45% appear to reflect hope that the parties will strike a deal that avoids additional import duties and reduces animosities on a broader scale.
Another collapse in negotiations, however, could jolt markets decidedly lower.
Trump said he is eager to ensure China follows through on its commitments so he can claim a political victory and shore up his support in key Midwestern farm states such as Iowa ahead of the 2020 presidential election. The race is already colored by a Democratic-backed pushed to impeach the 45th president.
Yet markets have been almost exclusively focused on the impact off souring trade relations on business sentiment and strategy.
The Sino-American trade spat thus far has been costly for U.S. farmers. Take soybean exports to China, a country that snaps up 57% of all soybean production world-wide.
U.S. soybean exports to China sank to $3.1 billion in 2018 from $12.2 billion in the prior year, Census trade figures show.