China may resume ethanol purchases from US under 'skinny' trade deal

Industry has been devastated by tariffs

China may resume purchases of U.S. ethanol to meet its spending commitments under an initial trade deal with the U.S., Bloomberg reported Tuesday, citing people familiar with the matter.

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The Phase One deal, announced last week, includes an agreement from Beijing to import up to $200 billion of U.S. goods, including $40 billion to $50 billion of agricultural products, according to the U.S. Trade Representative's Office. Trade officials didn't immediately respond to FOX Business's request for comment.

Some analysts have questioned the feasibility of such a large purchase of agricultural products, considering China only bought about $24 billion in agricultural goods in 2017, the year before the trade war began.

The purchase of U.S. ethanol, however, could help bridge the gap.

FARMERS, MANUFACTURERS WELCOME 'PHASE ONE,' BUT ASK TRUMP FOR MORE

While the ethanol industry was on the verge of a boom before the trade war, it has since been devastated by tariffs, Todd Becker, CEO of Green Plains -- the United States' fourth-largest ethanol producer -- said in a July interview with Reuters. As production and inventory have increased, demand for ethanol has significantly decreased, he explained.

"Some plants will slow down, some will shut down, some will shut down forever," Becker said.

Corn is delivered to the Green Plains ethanol plant in Shenandoah, Iowa, in 2015. (AP Photo/Nati Harnik)

China also may reroute trade to the mainland so that U.S. goods don't have to pass through Hong Kong. That would enable China to count about $10 billion more in shipments toward its targets since the U.S. doesn't include goods going to Hong Kong as part of its trade with Beijing, Bloomberg reported.

Leaders are also discussing how the rerouting could be arranged without further damage to Hong Kong's economy, which has been hurt by pro-democracy protests that started around June, Bloomberg noted.

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