US, China agree to cut American trade deficit

The United States and China have agreed to take measures to “substantially reduce” America’s massive trade deficit with China, but the administration of President Donald Trump failed to get the Chinese to commit to a specific numerical goal.

Still, the talks, which ended May 19 after two days with the issuance of a joint statement, may have helped to ease tensions at least slightly between the world’s two biggest economic powers. In recent months the two have threatened to impose punitive tariffs on billions of dollars in each other’s exports, including grain sorghum. China is the top destination for U.S. sorghum exports, in 2017 having bought 4.76 million tons of grain sorghum, worth $1.1 billion.

In the statement, Beijing committed to “significantly increase” its purchases of American goods and services, saying that the increase would “meet the growing consumption needs of the Chinese people and the need for high-quality economic development.” The two countries also agreed on “meaningful increases” of U.S. agriculture and energy exports and greater efforts to increase trade in manufactured goods and services. The U.S. said it would send a team to China to work out the details.

Via Twitter, Trump tweeted May 21, “Under our potential deal with China, they will purchase from our Great American Farmers practically as much as our Farmers can produce.”

During the talks, China’s Commerce Ministry announced May 18 it had terminated anti-dumping and countervailing duty investigations into U.S. sorghum and the temporary anti-dumping deposit collected will be returned in full, stating these measures do not serve public interest. 

Reacting to the announcement National Sorghum Producers Chairman Don Bloss, a Pawnee City, Nebraska, farmer, said in a statement, “National Sorghum Producers is gratified by this announcement and this quick result, which is a win for China and a win for America’s sorghum farmers. We agree that it is in China’s public interest to terminate these cases, and we look forward to deepening our trade ties with our Chinese partners and customers.

“From the start, NSP cooperated fully with MOFCOM’s investigations, submitting thousands of pages of responses demonstrating U.S. sorghum was being fairly traded with China. We demonstrated that we were helping, not injuring, Chinese consumers and farmers, and it was in no one’s real interest to restrict this important trade.”

Senate Agriculture Committee Chairman Pat Roberts, R-KS, said in a statement, “America’s sorghum producers can breathe a sigh of relief today.” Roberts gave credit to President Trump for listening to his concerns about trade with China and urged President Trump to continue pursuing open markets for all U.S. industries.

Secretary of the Treasury Steven Mnuchin said May 20 the U.S. and China are stepping back from a possible trade war that produced “meaningful progress.”

Despite not getting China to agree to trim its overall trade surplus with America by a specific amount, Mnuchin said the U.S. team did get a number of commitments on a framework for reducing the deficit over time, including big increases in purchases of farm products and a doubling of purchases of U.S. energy products.

“We are putting the trade war on hold,” Mnuchin said on “Fox News Sunday.”

Because of the progress made in negotiations, Mnuchin said the Trump administration has agreed to put on hold punitive tariffs on up to $150 billion in Chinese products. China had promised to retaliate in a move that threatened a tit-for-tat trade war.

Both Mnuchin and Larry Kudlow, head of the president’s National Economic Council, said that while China did not agree to meet the $200 billion deficit reduction goal that President Donald Trump has discussed, the Chinese did agree to steps that could ultimately mean big cuts in the trade gap between the two nations.

Mnuchin said the actions China has agreed to take as part of the framework the two countries have reached will result in boosting sales of U.S. farm products to China by 35 to 40 percent in this year alone. He said the agreement could result in doubling sales of U.S. energy products, which Mnuchin said could mean an increase in sales of U.S. energy products by $50 billion to $60 billion over the next three to five years.

Secretary of Commerce Wilbur Ross is set to travel to China soon with agricultural issues being one of the focal points for talks with his counterparts. Speaking to agricultural reporters from China, undersecretary of agriculture for trade and foreign agricultural affairs Ted McKinney said, “These are largely not government-to-government transactions. We can help set structure. We can help set expectations. We’re happy and fully engaged to do that. But market-based demand is going to be a big factor. Based upon what I’ve heard, I’m excited about that potential.”

McKinney was in Guangzhou, China, with over 20 commodity groups and ag companies on a trade mission when the announcement was made.

“The planning for this (meeting) started way back in October, and so not withstanding there were issues brewing. We elected to go ahead, and by golly, we’re so glad that we followed through, because it’s been a wildly successful visit,” McKinney said.

“There were more than 100 Chinese buyers, there were more than 180 meetings, and that was just half of our time. I was quite taken by the interest in growth in the importing of U.S. products, including some that have had tough times with inspections and other activities at the port. Products like sorghum and cherries.”

When informed of Trump’s tweet, McKinney responded, “I don’t want people to get overly excited. I think we should be very cautiously optimistic.”

Last August, U.S. Trade Representative Robert Lighthizer began an investigation into Beijing’s strong-arm tactics to challenge U.S. technological dominance. These include outright cyber theft of U.S. companies’ trade secrets and China’s demands that American corporations hand over technology in exchange for access to the Chinese markets.

Last month, the administration proposed tariffs on $50 billion of Chinese imports to protest the forced technology transfers. Trump later ordered Lighthizer to seek up to an additional $100 billion in Chinese products to tax. 

China responded by targeting $50 billion in U.S. products, including soybeans—a shot at Trump supporters in America’s heartland. The prospect of an escalating trade war has shaken financial markets and alarmed business leaders.

Trade analysts said it was highly unlikely that China would ever agree to a numerical target for cutting the trade gap between the two nations, but they said the talks likely were more successful in de-escalating recent trade tensions.

“It is likely that this agreement, weak and vague though it is, will serve as grounds to at least delay the imposition of tariffs,” said Eswar Prasad, an economist and trade expert at Cornell University.

“The Trump administration seems eager to engineer at minimum a temporary peace with China to ensure a smooth run-up to the Kim-Trump summit in June,” Prasad said, referring to the June 12 meeting between Trump and North Korea’s leader.

The Associated Press contributed to this report.

Larry Dreiling can be reached at 785-628-1117 or [email protected].