Strengthening Dollar May Challenge US/China Trade
By Isis Almeida, Bloomberg News
Crop traders obsessing over the deadly coronavirus in China may be overlooking another key challenge to the Trump administration’s phase one trade deal: the U.S. dollar.
The virus’s spread is upending supply chains and cutting food demand in China, delaying billions of dollars in American sales of everything from pork to soybeans. Making up for the losses later in the year may be difficult if the dollar continues to strengthen against currencies in Brazil and Argentina, two of the U.S.’s top agricultural rivals.
China has pledged to buy $36.5 billion in U.S. farm goods this year under the trade deal, $12.5 billion more than in 2017. But some tariffs remain in place, and China has said its purchases need to make economic sense with both Washington and Beijing acknowledging that the timing of the sales depends on market conditions.
“We are already dealing with retaliatory tariffs and now coronavirus presents challenges for China to fill its obligations,” said Dan Kowalski, vice president of research at CoBank, a $145 billion lender to the agriculture industry. “If the dollar remains strong, that has tangible impacts on market conditions. And that could or could not play a part in China filling its purchases.”