There are three ways in which China can import $30 billion more in U.S. agricultural goods per year in an attempt to appease President Trump’s concerns about deficits.
These three should give you a sense of how off the mark this number is.
Either China wants to ram food down the throats of its citizens, has plans to build more silos to store grain (which is already rotting in Chinese silos), or will just stop buying soy and beef and chicken from Brazil, much to Brazil’s dismay.
Bloomberg reported today that China is proposing to buy an additional $30 billion a year as part of the nine key points being negotiated this week in the latest round of trade talks taking place in Washington.
U.S. exports of agricultural products to China totaled $20 billion in 2017, so if China wants to buy another $30 billion, then China would more than double its intake of American farm goods. Unless China means they will hit $30 billion total, which does not seem to be the case, then there is no way China imports an additional $30 billion.
China’s Funny Math No. 1
According to the U.S. Trade Representative data, China bought $12 billion worth of soybeans last year, far and away the leading item China buys from American farms. In a distant third was cotton at $978 million, followed by hides and skins for leather at $945 million, feed grain at $839 million and pork at $662 million. China owns Smithfield Foods, one of the largest pork meat processors in the U.S.
When China is not buying agricultural goods from the U.S., it is buying them from Brazil. So let’s see where that $30 billion will come from next year if China is remotely serious about doubling its imports, as Bloomberg reported today.
China bought $3.8 billion worth of Brazilian commodities in January alone. Most of it was crude oil. Iron ore was second, and soybeans were third. China spent $747.4 million on Brazilian soybeans in January, according to the Minister of Foreign Trade. To put that into perspective, Brazil sold $815 million worth of soybeans globally, meaning China is nearly the entirety of Brazil’s soy market.
To make it simple, if Brazil sold $500 million per month in soybeans to China, that would be $6 billion per year.
China also bought $107 million worth of Brazilian beef in January, $67 million worth of cotton and $61.3 million worth of chicken. Brazil is the world’s leading exporter of beef and chicken. It is the No. 2 exporter of soybeans after the U.S.
Using January figures, Brazil exports at least $1 billion a year in beef to China.
China is not even a top-five buyer of U.S. beef. If it was, and it replaced No. 2 Mexico (Japan is No. 1), then China would account for around $980 million annually in beef exports, according to the U.S. Meat Export Federation.
If China did that, they would either be loading up on red meat protein or would drastically cut its beef trade with Brazil. Even if China shared its beef trade between the U.S. and Brazil, that would not make a dent in the $30 billion China thinks it can import from American food producers.
Chicken is even less money. China imports around $1 billion worth of poultry meat worldwide. U.S. chicken exports to China have been closed since 2015 because of bird flu fears.
Reuters reported in January that if that ban were lifted as part of trade talks, it would open a $600 million per year market. Let’s double that for the sake of argument to $1.2 billion. Add that to the U.S. taking half of Brazil’s beef business and you get less than $2 billion.
Add $2 billion to Brazil’s $6 billion a year in soybean exports (a conservative estimate) and you get $8 billion. That’s $22 billion short.
China is the No. 2 buyer of U.S. pork. In 2017, it imported $1.07 billion worth of pork meat, based on U.S. government data compiled by the U.S. Meat Export Federation.
If China doubled its pork imports, that’s around $2 billion, meaning they are still $20 billion short.
China is a top-five buyer of American cotton, below Vietnam, according to trade data from the National Cotton Council of America. The U.S. is the world’s leading producer of cotton, accounting for 16% of global supply, and is the world’s No. 1 exporter.
American cotton exports worldwide were around $5 billion in 2017, according to the American Farm Bureau Federation. Most American cotton sold to China is subject to tariffs as high as 40%. Those could come down, though China will have to calculate how much they can come down without hurting its domestic cotton producers and risk more rural migration to already overcrowded cities.
In 2017, China bought $978 million worth of U.S. cotton, according to the American Farm Bureau.
Let’s pretend China tripled that and bought $3 billion worth of U.S. cotton. They’d be $17 billion short of their $30 billion target.
The U.S. trade deficit with China is mainly Trump’s ax to grind.
The gap between the two countries has been widening since the country entered the World Trade Organization in 2001 and launched itself as the world’s manufacturing hub.
After becoming the centerpiece of the global supply chain, China’s working class became middle class. Its savvy and its politically connected became millionaires or billionaires. China has been forever transformed.
Not Even A Dent
Maybe if American agribusiness came up with new value-added commodities desirable to the Chinese?
Still, if the U.S. sold gold-plated soybeans and corn, or organically raised cows that got Swiss massages every hour and were slaughtered with peaceful Hindu mantras playing in the background, all for an extra price, of course, China would still struggle mightily to reach its $30 billion figure. And if they did succeed, the U.S. trade gap of $382 billion in 2018 would become $352 billion.
Before it goes up again the following year.
If China opted to spend even 10% of that $30 billion on U.S. farm goods, it would be good news for agribusiness.
But the only way the trade gap shrinks is if the U.S. economy grinds to a halt and American firms that rely on China as an integral part of their supply chain move elsewhere. Otherwise, this trade deficit is not going away. This supposed $30 billion proposal in new farm orders is nowhere near close enough to get us there, assuming that even matters.
This article originally appeared on Forbes