China Seeks U.S. Flexibility on Trade Targets as Virus Spreads

09:05AM Feb 03, 2020
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Coronavirus could delay Chinese purchases of U.S. ag goods.
( MGN )

(Bloomberg) -- Chinese officials are hoping the U.S. will agree to some flexibility on pledges in their phase-one trade deal, people familiar with the situation said, as Beijing tries to contain a health crisis that threatens to slow domestic growth with repercussions around the world.

The agreement sealed Jan. 15 is supposed to take effect in mid-February. It has a clause that states the U.S. and China will consult “in the event that a natural disaster or other unforeseeable event” delays either from complying with the agreement. It’s unclear whether China has formally requested such a consultation yet, but the people familiar with the matter said the plan is to ask for it at some point.

The Chinese Commerce Ministry and U.S. Trade Representative didn’t immediately respond to a request for comment.

In the first year of the deal, China committed to buy an extra $76.7 billion of American goods beyond what it did in 2017, and an additional $123.3 billion in the second year. Purchases of agricultural products are particularly important for the livelihoods of American farmers who’ve been hurt in an escalating tariff war with China over the past two years and are a key base of support for President Donald Trump.

Market Decline

Futures prices for soybeans -- one of the main commodities Beijing agreed to purchase -- are reflecting concern about weaker demand from the world’s second-largest economy. Soybeans traded in Chicago were little changed after nine straight days of declines, the longest losing streak since July 2014.

The death toll from the coronavirus outbreak rose past 360 and total confirmed cases reached almost 17,400, and the Philippines reported the first death outside of China.

Amid the turmoil, Chinese officials are evaluating whether the target for economic growth this year should be softened as part of a broader review of how the government’s plans will be affected by the deadly virus outbreak, according to a separate Bloomberg report on Monday.

For its part, the U.S. hasn’t seen any major effects on its economy from the epidemic, White House economic adviser Larry Kudlow said last week.

“This is principally a public health problem and the pandemic of course is in China, not the U.S.,” Kudlow said Thursday in an interview on Fox Business Network. “Insofar as the economy, we see no material impact.”

Asked if the virus will give the U.S. more leverage in the second phase of trade discussions with the Asian nation, Kudlow said the outbreak is “completely separate from trade, jobs and all the rest.”

“This is an issue of helping them if we can, offering our assistance, engaging with them, this is a humanitarian effort on our part -- nothing to do with economic rivalries,” he said.

 

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