Late yesterday, Trump said that he hopes for China to quickly quadruple its soybean purchases from the US. This comes as both sides are still looking to find ways to strike a compromise on trade. The current truce is one put in place so that negotiations can develop further but so far, it looks like there’s no real progress.
Now, this isn’t the first time Trump wants China to step up its import of soybeans from the US. Yes, it has a familiar ring to it because this was one of the staple pieces for the Phase One trade deal back in 2018/19.
If you recall back then, the trade war at the time saw China almost halt all of its purchases of US soybeans before the deal was struck. But even as the deal was struck, China never really stepped up their purchases back to levels seen before the accord.
And by the time we got to 2020, China was instead buying a ton of soybeans from Brazil rather than the US. And both sides were closing an eye on the situation as they ignored the actual trade figures in favour of keeping up appearances.
China even promised “a record amount of US soybean purchases” for that year but didn’t deliver. And by the end of it all, China only fulfilled roughly 58% of US exports that it had committed to purchase under the Phase One trade deal. Good stuff.
So, what can we expect from the latest development here?
Well, more of the same. Trump can call on China and sign as many deals as he wants for Beijing to do something to step up purchases of US exports. But the bottom line is, nothing is going to change as China knows that they can wait out Trump’s term and whatever deal signed will be put in the trash can right after. Or even before that, with both sides preferring to just put up a facade and keep up theatrics.
China will allow Trump to boast and brag all he wants about tariffs and trade deals. But when it comes to the actual numbers, Beijing knows that they’re not conceding their position at the end of the day. It’s a win-win in that sense.
And that will likely be the same story again during Trump’s second term here.
For markets, it’s also going to be a case of déjà vu. The trade numbers don’t matter so long as both sides are playing nice. And that will continue to keep risk sentiment underpinned as geopolitical and trade fears simmer down.
This article was written by Justin Low at investinglive.com.