China’s food fight with the U.S. is getting costly at home. That doesn’t mean a resolution to overall trade tensions is near, but it could help keep further escalation in check.
Some Chinese enterprises have made inquiries with U.S. exporters about purchasing agricultural products and have applied to Beijing for tariff exemptions, according to a Sunday report from China’s official news agency Xinhua. President Trump claimed earlier this month that China wasn’t living up to its purported commitment to buy large quantities of U.S. farm goods—part of the cease fire agreed on by Mr. Trump and Chinese President Xi Jinping at the G-20 in June. China is among U.S. farmers’ largest foreign customers, and U.S. agricultural exports such as soybeans, pork and sorghum were early casualties of the trade conflict.
The Xinhua report didn’t specify when any exemptions, if granted, would come into effect. But the dovish signal on trade fits with a longstanding pattern by Beijing of framing concessions in terms of domestic priorities rather than pressure from foreigners. Xinhua’s report said that the Chinese companies in question were interested in continuing to import U.S. agricultural goods to “satisfy the needs of Chinese consumers.”
U.S. imports would help calm Chinese food price inflation, which has long been a political issue in the People’s Republic. The latest jump in pork prices—up around 20% on the year—is the last thing Beijing needs right now, with incomes already under pressure from the weak labor market. An African swine-fever epidemic has decimated China’s hog population in recent months.
High food price inflation, which has spread to other important foodstuffs like apples, lamb and vegetables, makes China’s fiscal policy less effective, since consumers end up spending more of the extra income from their recent tax cut on food. It also constrains the administration’s room for further monetary stimulus to prop up prices of industrial goods and the finances of China’s heavily indebted factory sector.
Pork price inflation in China has gotten so bad that Chinese importers appear to have started buying the meat from the U.S. even with big tariffs already in place. U.S. pork exports to China in May more than doubled on the year to $34 million, according to U.S. International Trade Commission data, reversing the falling trend earlier in 2019.
Punishing U.S. farmers is all very well from Beijing’s perspective. Alienating Chinese consumers and importers who end up paying tariffs anyway is another matter.
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