President Trump, speaking at the forum in Davos, said that the first phase of the deal with China is the best deal that has ever been concluded.

However, picking holes in the claim requires a really little effort - China has stated several times that the increase in US imports will occur on market conditions. On Tuesday, the head of China's foreign trade department reiterated that "import expansion will be based on the free market and WTO rules and will not crowd out imports from other countries."

If chanting of this mantra continues, it means that either China has its own very specific definition of market conditions (which are brought to the desired state by weakening tariffs or by subsidies) or a deal, primarily in terms of agricultural products, is doomed to failure. Since American agricultural products are now losing the competition, and expectations for a recovery of weakened domestic demand in China are not expected in 2020.

The fact that the US is losing the race with Argentina and Brazil in terms of soybeans is indicated by the following interesting observation: when China decided to return to the  domestic market part of soybeans from the US by issuing tariff waivers, the price of American beans has been gradually increasing , eventually surpassing the end price of Brazilian beans in Chinese ports:

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China has already provided half of its annual soybean needs for 2020 through contracts with Brazil, which harvest is going to hit the Chinese market in February. In addition, China’s demand for soybeans is expected to decline due to the loss of almost half of the pig herd due to African swine.

In the short term, American farmers may see their position improving during the initial stage of fulfillment of the deal, but if the crops import is stored in Chinese barns such an equilibrium will be unstable.

Fulfillment of the deal could jeopardize China’s trade partnership with several other countries: importing sorghum, wheat or corn will harm Australia and Vietnam, marine products - Canada and the Russian Federation, energy - Australia, Indonesia and Qatar. I have already mentioned that due to an increase in exports of manufactured goods, European and Japanese manufacturers are likely to see their export orders diminishing sharply.

It is worth noting that 28% of US exports to China are not covered by the terms of the trade deal. From a legal point of view, China has the opportunity to “transfer” undiscussed US imports to other trading partners. But it is too early to speculate about that.

In the meantime, we are waiting for updated data from the Department of Agricultural Products, in particular on soybeans. For your convenience, I include a link to the agro data https://quickstats.nass.usda.gov

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