China’s economic growth slowed in the second quarter to its slowest pace in more than two decades. GDP grew 6.2% from a year earlier, below the 6.4% expansion in the first quarter. The ongoing trade war with the U.S. is surely a factor.
President Trump was quick to take credit for China’s struggles, tweeting, “The United States tariffs are having a major effect on companies wanting to leave China for non-tariffed countries. This is why China wants to make a deal…and wishes it had not broken the original deal in the first place.”
China’s 2nd Quarter growth is the slowest it has been in more than 27 years. The United States Tariffs are having a major effect on companies wanting to leave China for non-tariffed countries. Thousands of companies are leaving. This is why China wants to make a deal....
— Donald J. Trump (@realDonaldTrump) July 15, 2019
Trump may think the pressure of a weakening economy may force China to give in to U.S. demands for a deal, but he’s keeping his fingers on the trigger, firing a warning shot last Thursday, tweeting, “China is letting us down.”
Mexico is doing great at the Border, but China is letting us down in that they have not been buying the agricultural products from our great Farmers that they said they would. Hopefully they will start soon!
— Donald J. Trump (@realDonaldTrump) July 11, 2019
At the G20 summit in June, China said it would resume purchasing the U.S. agricultural goods it had stopped buying in response to Trump’s tariffs. In return, Trump backed off his threat to impose additional tariffs on Chinese goods and even greenlit the sale of technology to Chinese tech giant Huawei in spite of national security concerns.
Trump’s assertion that “we’re right back on track” after the bilateral meeting now seems to have been premature.
Exports to China have not picked up
The dollar amount of wheat and corn that China has purchased since the G20 summit is zero. There have been no exports of either of those two agricultural commodities to China, according to the latest Department of Agriculture data covering the period up to July 4. Exports of cattle hides and pork have also dropped since the G20 summit.
Farmers – particularly soybean farmers – have been hit hard by China’s retaliatory tariffs since the start of the trade war last year. They have faced financial hardship as sales of soybeans to China have plummeted. U.S. soybean exports to China were down $8.5 billion (77%) from August 2018 to May 2019, compared to a year earlier.
President Trump has tried to alleviate farmers’ pain with a $16 billion bailout announced in May. Trump has also seen his approval ratings drop to net-zero or turn negative recently in eight crucial swing states where he won in 2016. Key among those states are Iowa and Ohio, big soybean exporters.
Since the trade truce was reached on June 29, China has reduced imports of soybeans from the U.S. In the week prior to the G20 summit, China imported 396,691 metric tons of soybeans; that has since dropped to 181,580 metric tons.
Slight increase in some U.S. agricultural exports
China did, however, increase its purchases of cotton, sorghum, cattle wet blues (raw cattle hides), and beef since the truce.
Signs the trade war is deteriorating
By saying “China is letting us down,” Trump has made it clear he does not view the uptick in exports of a few American agricultural goods as a sign of goodwill from President Xi Jinping. In fact, on multiple other fronts China seems to be taking a more aggressive stance toward the U.S.
Washington officials and other American business leaders have stated that they’ve been harassed by Chinese authorities and held for questioning in China. Many fear becoming targets in the trade war. China has also threatened to sanction U.S. firms in retaliation for the sale of $2.2 billion in tanks, missiles and military hardware to Taiwan in the last month.
"We are in...a quiet period for the negotiations," White House adviser Peter Navarro said on Friday. "Ambassador [Robert] Lighthizer is going to go to Beijing with the Treasury Secretary in the very near future and we're going to have constructive talks. My advice for investors is to be patient with this process."
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