The Wall Street Journal gave the market some good news amid rising concerns about Italy and trade wars, when it reported that in an attempt to appease Trump, over the weekend Beijing had offered to buy US farm and energy products in a trade package worth an estimated $70 billion.
The team of Chinese envoys – led by Vice Premier Liu He, President Xi Jinping’s top economic official – offered a US team headed by Commerce Secretary Wilbur Ross a package that involved Chinese companies buying more US soybeans, corn, natural gas, crude oil and coal among other agricultural and energy products. Stocks briefly rallied on the news, but the gains then quickly faded as the market realized this was nothing more (or less) than prior such gambits offered by China.
China’s voluntary proposal comes as president Trump pushes China to commit to reduce the $375 billion US merchandise-trade deficit with China by $200 billion, and while the $70 billion package would help move the US toward that goal, it would be rather insufficient.
Also diluting the Chinese offer, Liu explained that the package would be void if Washington proceeded with plans to impose tariffs on $50 billion in China-made products.
WSJ also points out that US officials are skeptical of the offer for several reasons, including the fact that the US likely wouldn’t be able to ramp up agricultural production quickly enough. As of last week, the White House said it would move ahead with tariffs and sanctions restricting China’s access to US technology and the US market while punishing Beijing for its purportedly unfair trading practices. If accepted, the offer would benefit the farm-belt states that voted heavily for Trump during the election.
China also offered to get state-owned companies to buy more US natural gas, though that could also be subject to production difficulties.
“Nothing has firmed up yet,” one official said. “It would require additional rounds of discussions between the two sides.”
It’s unclear whether the Trump administration will take the offer seriously, although judging by the market reaction, the early answer is no.
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