Energy, corn, chips drive late surge in US exports to China — Panjiva


Energy, corn, chips drive late surge in US exports to China

Ags - Grains/Beans 284 Ags - Meat/Dairy 248 China 2918 Cons. Discr. - Autos 1125 Energy - Coal 58 Energy - Natural Gas 142 Materials - Chemicals 207 Trade Deals 982 U.S. 5260

Trade rhetoric is starting to rise again between the U.S. and China. While it’s unlikely to reach the levels seen at the height of the trade war between the two countries, actions like the U.S.-EU joint statement on steel and the Chinese application to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) show that disagreements remain.

The last significant agreement between the U.S. and China was the so-called phase one deal that negotiated a ceasefire by postponing pending Section 301 duties and halving tariffs already in place. While the deal included a variety of qualitative commitments that are difficult to assess, China agreed to purchase an escalating amount of U.S. goods and services. The goods were organized into three broad categories: manufactured, agriculture, and energy products.

At a high level, the purchase commitments could be considered successful because they increased U.S exports. Monthly exports from the U.S. to China increased by 34.9% from 2017, the baseline year, through Oct. 31, 2021. However, they still failed to reach the export targets; total purchases in 2020 and the first 10 months of 2021 made up only 61.4% of the goal. This will likely rise over the next two months if November and December follow the 2020 trend of higher purchases — mostly of energy through the winter — but reaching the full targets is unlikely. It is also worth noting that the purchase commitments were contingent on “market conditions,” with the COVID-19 pandemic still impacting global trade.

Phase 1 Purchases increased but still missed

Chart shows U.S. exports of goods to China by category on a monthly basis. Source: Panjiva

Panjiva analysis of official data shows which subcategories were the most successful in China under the phase one deal. Cereals posted the largest change in monthly exports between 2017 and the first 10 months of 2021, up $566 million or 500.3% from 2017 levels. This was represented by exports of corn, contributing an increase of $453 million monthly. Exports of meat also increased by $288 million or 618.7% monthly. Meanwhile, oilseeds (soybeans) and seafood exports to China were down $194 million and $38 million monthly respectively. The fall in monthly exports of soybeans is likely a sore spot for proponents of the deal that focused on this category.

Under industrials, monthly exports of industrial machinery, pharmaceutical products, and other manufactured goods increased by 29.7%, 173.0% and 52.5% respectively. Other manufactured goods represented the biggest change, up $554 million monthly, with growth of $359 million per month in exports of semiconductor manufacturing equipment and $583 million per month in integrated circuits. However, there was a decline of $308 million per month in vehicle exports, likely indicative of the growing number of domestic Chinese car manufacturers.

Energy exports were also up, possibly to fuel increased needs as the winter season nears. Energy demands have come to the forefront in 2021 as regions like Europe face high energy prices due to a mismatch of supply and demand. Large increases in U.S. exports came from the LNG and coal categories, up $229 million and $151 million respectively. These represent a 648.5% and 450.3% monthly increase respectively but come too late to cover remaining commitments in the last two months of the deal. The renegotiation or termination of the agreement with China will likely be an open policy question as the Biden administration enters 2022.

Cereal grains see largest growth from phase 1 deal

Chart shows change in monthly U.S. exports to China by Phase 1 deal subcategory between 2021 and 2017. Source: Panjiva

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