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U.S. Commodity Exports to China to Rise Amid Trade Talks
USAgNet - 05/22/2018

China has pledged to buy more U.S. goods to reduce America's huge trade deficit and help avoid exacerbating a trade war between the world's two biggest economies, with energy and commodities high on Washington's list of products for sale. According to Reuters, the U.S. trade war with China is "on hold" after the governments agreed to drop tariff threats and work on a wider agreement, U.S. Treasury Secretary Steven Mnuchin said on Sunday. Washington is especially keen to sell more of the United States' surging oil and gas production.

Yet infrastructure bottlenecks mean energy and commodity exports can grow only gradually, and only if U.S. oil, gas and other goods remain cost attractive against global competition.

Morgan Stanley estimates it could take up to three years to increase Chinese purchases of U.S. goods by $60 billion to $90 billion, with a rise in agricultural imports in the near term followed by energy.

Total U.S. oil and gas exports to China in 2017 were worth $4.3 billion, based on average prices, a far cry from a deficit reduction target of $200 billion. But U.S. exports are rising, and China has spent $2 billion on U.S. oil in the first quarter of 2018 alone.

Increased purchases of U.S. oil will help China replace Iranian supplies, which are expected to fall as the United States re-imposes sanctions on Tehran.

China's U.S. oil import bill this year could rise to $9 billion to $11 billion with purchases rising to 300,000 to 400,000 barrels per day (bpd) in the second half of 2018, according to Energy Aspects.

That would still be only a fraction of China's import needs of 9.6 million bpd in April, worth around $20 billion. And while U.S. exports may grow somewhat, infrastructure bottlenecks for the time being hold back sales.

China could direct its state-owned soybean crushers to buy more of America's surplus oilseed, said Paul Burke, North Asia regional director for the U.S. Soybean Export Council.

That would potentially add 14 million tonnes of imports worth $6 billion to this year's trade bill, at the expense of major exporters, Brazil and Argentina.

Soybeans were the United States' second-largest export to China by value, worth $12 billion last year.


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