China has told state-owned companies to halt purchases of soybeans and pork from the United States in response to President Donald Trump’s announcement that his administration would begin the process of eliminating Hong Kong’s special trade status.
Chinese importers have cancelled 10,000 to 20,000 metric tons of American pork shipments–roughly one week’s orders at recent rates–following President Trump’s comments on Friday. Purchases of corn and cotton by state-owned companies have also been suspended. The order from Beijing isn’t a full stop. Private importers haven’t received a government order to suspend buying of U.S. farm produce.
The move should be considered a shot-across-the-bow rather than an end to the U.S.-China Phase 1 trade deal negotiated in January. In that deal China pledged to buy an additional $32 billion worth of U.S. agriculture products. However, with the disruption of global economies from the coronavirus pandemic playing a big role, China has managed to import only $3.35 billion in American agricultural products in the first three months of the year, according to the U.S. Department of Agriculture. That’s the lowest total for a first quarter since 2007.
The pace of purchases had picked up, though, as China started to gradually reopen its economy. The country had bought more-than 1-million tons of U.S. soybeans in just two weeks in May, and made rare purchases of U.S. soybean oil and ethanol.
Now, however, it looks like the two countries are back on a collision course in trade.
Neither rising U.S.-China tensions, signs of an uptick in coronavirus cases in several U.S. states, or the violence that has marred largely peaceful protests in the aftermath of the killing of George Floyd by police in Minneapolis has rocked the market.
As of noon New York time today, the Standard & Poor’s 500 was up 0.18% and the Dow Jones Industrial Average has gained 0.27%. The NASDAQ Composite is higher by 0.53% and the Russell 2000 small cap index has climbed 1.40%. The iShares MSCI Emerging Markets ETF has moved higher by 1.86%.
Today’s buying has focused on stocks that would benefit from a pickup in revenue on a re-opening of the economy and that had dropped on fears of a coronavirus recession. For example, Spirit Airlines (SAVE) was up 10.25% and American Airlines Group (AAL) gained 6.71%.
Gold was up too, though, with Barrick Gold (GOLD) gaining 2.25% and gold itself ticking higher by 0.07% to $1752.90 an ounce.
Oil prices fell as oil traders tried to guess what calls for an early OPEC meeting might mean for the agreement to cut production. U.S. benchmark West Texas Intermediate was down 2.06% to $34.76 a barrel. International benchmark Brent crude was off 0.48% to $37.66 a barrel.
