In interviews with the media on Monday June 26th White House Advisor Dr. Peter Navarro, a confirmed Sinophobe, implied that the Phase One Trade Agreement with China “was over”.  This remark sent the stock market and commodity prices into a tailspin with the Dow dropping 400 points before a retraction was issued.  Navarro claimed he was misinterpreted and his comment referred to the “lack of trust we now have of the Chinese Communist Party after they lied about the origins of the China virus and foisted a pandemic upon the world.” 

Without commenting on the validity of this questionable assertion, it is evident that the Administration now displays a considerable animosity towards China. Whether this is based on the public health ramifications of the COVID-19 outbreak or the pandemic situation is being misrepresented as a diversionary tactic for political reasons is a question of speculation.  It is considered significant that President Trump tweeted on Monday evening that the agreement is still in place and expressed the wish that China will comply with commitments.  This sentiment was reinforced by Larry Kudlow, Director of the Economic Council who praised Beijing for their action on trade.

In recent weeks, China has placed orders for soybeans consistent with their purchase pattern in previous years, requiring deliveries from September onwards representing the new market year.  The USDA data confirmed that exports of soybeans to China attained 208,000 metric tons in March followed by 424,000 metric tons in April. Commitments amounting to $10 billion in terms of the Phase One Agreement have already been completed.

Currently there are delays on shipments of poultry now subject to an unjustified testing procedure for COVID-19 virus. Product from one plant in Springdale, Arkansas has been embargoed based on the prevalence rate of COVID-19 among workers.  Whether this action is based on a distorted and highly sensitive concern over COVID-19 and the recent upsurge in Beijing, or whether it is yet another one of the not-so-subtle messages sent by the Central Government is unknown at this time. Traders report that the action, also directed against Brazil is the initiative of the General Administration of Customs.

It is evident that China will be hard pressed to achieve the targets for agricultural imports required in terms of the Phase One Agreement.  The volume of commodities actually delivered would have to increase by $10 billion for each of the succeeding quarters of 2020 to attain the promised $36.5 billion for the current calendar year.  Informed agricultural economists project that China may not even meet the 2017 baseline of $24 billion.