The White House celebrated a “phase one” trade deal struck with China on Friday, which calls on Beijing to ramp up agricultural purchases to between $40 million and $50 million, but experts are warning it may sound better in theory.
In a research note sent out on Monday, Darin Friedrichs, senior Asia commodity analyst at brokerage INTL FCStone in Shanghai, said that China has made no reference to a deal, mentioning to it instead as progress in negotiations.
“The U.S. side likes an excuse to delay tariffs,” Friedrichs said. “China needs things like pork and soybeans, so buying them from the U.S. in exchange for a delay in the tariffs is a win-win.”
Friedrichs also noted that in Dec. 2018 China had agreed to ramp up agricultural purchases in exchange for a tariff delay.
“China agreeing to buy $50 billion of agriculture products depends on progress and resolution of the other issues, and there isn’t any reason to believe we’ve made any progress on those complicated issues,” he said. “I don’t think it makes sense to take Trump’s claim of $40-$50 billion in purchases at face value.”
A trader with a state-owned Chinese firm told Reuters that the market is still uncertain, adding that Trump could change the situation with a tweet, or escalation could resume.
Michael Pillsbury, China adviser to the president, told FOX Business the deal “is a success” adding that most people don’t know how close the talks were to a breakdown.
“It’s not in writing, that’s why the market I think was so cautious on Friday and again today,” Pillsbury told FOX Business’ Liz Claman. “I wouldn’t believe the critics who say nothing happened at all — it’s not a final deal, but the idea is brilliant to have phase one and phase two.”
President Trump touted the deal during a rally in Louisiana on Friday, joking that he wasn’t sure whether U.S. farmers would be able to produce enough to keep up with the incoming demand.
The deal is also expected to benefit the energy, banking and technology sectors.
Alongside the phase one deal, the U.S. and China agreed to a “trade pause,” meaning the U.S. will not raise tariffs on goods from China as scheduled this week. Rates were expected to increase to 30 percent.
It is unclear what the United States will give up as part of the phase one deal. On Friday, Trump said the terms will be written up over the course of three to five weeks. Phase two negotiations are expected to begin immediately after the first piece is signed.
Trump seemed optimistic about the negotiations that took place last week, saying in a tweet on Friday that “good things” were happening amid “warmer feelings,” alleging that everyone would like to see “something significant happen.”