China is pushing the pause button on American agricultural imports. On Monday, Beijing asked large state-run companies to stop buying soybeans and pork from United States exporters. The Chinese government put a hold on purchases of American cotton and corn, as well.
Displeased over China’s treatment of Hong Kong and the global impact of the coronavirus, President Trump announced last week that the United States would pull back certain protections for Hong Kong, as a means of retaliation against the Chinese government. Beijing responded in turn with import quotas on American goods.
China canceled between 10,000 and 20,000 tons of pork from the United States, and has begun buying soybeans from Brazilian instead of American farmers. The country is reportedly waiting to see what the United States does next, but may pull more imports in the future.
This puts the U.S. government in a tough spot. The president signed a ‘phase one’ deal with China in January, partially lifting tariffs in exchange for larger purchases of American goods. Since then, the coronavirus and subsequent global slowdown in economic activity has made reaching those targets less likely. From the first quarter of 2019 to the first quarter of 2020, American exports to China fell by $4 billion USD. It’s a remarkable difference, especially given that 2019 levels were already declining under U.S. imposed tariffs and 2020 was supposed to be a rebound year. China agreed to purchase $36.5 billion USD worth of goods from the United States in 2020, but only imported $3.35 billion USD during the first quarter of this year.
Now, the coronavirus has effectively hollowed out the agreement signed by the United States and China. In spite of that, the Trump Administration may have to keep it, even if China cannot meet its quota. Pulling out of the deal could result in a trade war and additional tariffs, which the United States (or heck, the entire world) cannot absorb right now. Tariffs are an imposition on any economy when indicators are healthy. Now, with 14.7% unemployment, and staring down an all-but-certain double digit GDP contraction, tariffs would only invite further economic decline at a time when we really cannot afford it.