Some policymakers and agricultural sector leaders are eying a trade deal inked with China during President Donald Trump’s first term as a tool to protect farmers from export losses triggered by retaliatory tariffs. But other experts argue that, absent a new deal, enforcement options are limited.
In his hearing last week, Scott Bessent, Trump’s pick for treasury secretary, told Finance Committee senators that, if confirmed, he would look at enforcing China’s purchasing commitments under the phase one deal to protect U.S. farmers from tariff retaliation.
The terms of the 2020 deal committed China to expanding its purchases of certain U.S. goods and services over the next two years — including a slew of agricultural products. Beijing, however, fell significantly short of its overall commitments, in part due to the onset of the COVID-19 pandemic and subsequent recession.
Some now believe that the deal could hold promise for limiting blowback on U.S. farmers if Trump pushes ahead with some of his plans to hike tariffs on China.
If confirmed, Bessent said at the hearing, “I will begin pushing for the purchase guarantees that were in the China agreement to be enforced.” He also suggested that a “catch-up” provision could be applied to compel Beijing to make up for the purchase shortfall over the last four years.
Sen. Roger Marshall, R-Kan., told Agri-Pulse he's open to the idea of using the deal to help U.S. farmers weather future trade shocks.
“I think it's very feasible,” said Marshall, a member of the Finance Committee who attended the hearing. He said after it that Trump "got this phase one agreement done with China before and they weren't being perfect, but they were getting close to living up to their agreements. And then, of course, once the Biden administration took over, China knew they could push Biden around and we lost all those markets.”
China was never on course to meet its agricultural commitments
Even before the pandemic roiled global trade, Beijing was behind on its agricultural purchases. The legal text of the deal only stipulated that China had to meet its year-end targets, but from the get-go, China was not making purchases at the pace required to put it on course to meet those targets, according to an analysis from the Peterson Institute for International Economics.
At the end of 2020 — just weeks before Trump left office — China had fulfilled between 64% and 82% of its annual commitment, depending on whether Chinese import data or U.S. export data are employed as the measurement.
China may have caught up slightly in the second year of the deal but still ended the two-year period having bought between 77% and 83% of its pledged agricultural purchases. This means, depending on the data used, U.S. agricultural producers were promised between $12.8 and $18.7 billion in sales that went unfulfilled over the two years.
Beijing underbought some commodities more than others. Corn was a bright spot, for instance, with Chinese buyers dramatically improving on their 2017 purchase levels. Purchases of soybeans, the largest U.S. ag export to China, were well below committed volumes, however.
Jim Sutter, CEO at the U.S. Soybean Export Council, has been arguing that the U.S. should do more to press Beijing to make good on its promises.
“I was quite happy to hear Treasury nominee Bessent bring that up and raise that as an idea,” Sutter said. “It would be a step directionally towards making sure the trade was continuing and making sure that the markets were open, rather than going to an alternative.”
The U.S. soy industry has diversified its exports since 2020, when the deal was signed. But Sutter insisted U.S. soy producers would be able to meet the increased demand that would come from additional Chinese purchases to make up for the phase one shortfall.
“U.S. production has grown a little bit,” Sutter added. “This year, global supplies are increasing more than demand, so there's a bit of a glut."
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Finding a way to protect farmers that does not involve direct payments like those made during Trump’s first term also has political advantages for Republicans and the incoming administration, Mary Lovely, a PIIE senior fellow, told Agri-Pulse.
“They used all the tariff revenue last time to compensate farmers, and they don't want to do that this time,” Lovely said.
Trump has floated using tariff revenues as a pay-for for new tax cuts. Every dollar saved on direct payments to farmers is additional revenue that can go into a reconciliation package as a spending offset.
The art of (enforcing) the deal
In the phase one deal text, both parties projected that the trajectory of increased purchases under the deal would continue through 2025. In his 2023 book, “No Trade is Free,” Trump’s U.S. Trade Representative from his first term, Robert Lighthizer, also said that negotiators anticipated the new purchase trajectories to carry through 2025.
But an expected trajectory is not the same as a binding commitment.
“I just don't see how that can be binding at all,” Lovely said.
The new administration could still determine that China has violated the terms of the phase one deal, a former U.S. trade official told Agri-Pulse. This determination would allow for retaliatory actions under Section 301 of the Trade Act of 1974 – including new tariffs, import restrictions, or a withdrawal of trade concessions.
“That would hurt the Chinese further, but I don’t see how it would protect U.S. agriculture,” Bill Reinsch, a senior adviser at the Center for Strategic and International Studies, told Agri-Pulse. “Tariffs didn’t produce full compliance the last time, and I doubt they would do it the second time around.”
Mary Lovely, a PIIE senior fellow.Lovely agreed that the threat of further tariffs would be unlikely to compel China to spur its agricultural purchases. “The Chinese are not going to be forced to do anything,” Lovely said. “It seems to me that this is a prelude or a pretext for doing more rounds of tariffs.”
Ultimately, the ability of the U.S. to enforce the deal will come down to what China will agree to, multiple analysts said. That means more negotiations — undermining the phase one deal’s utility as a rapidly deployable protective tool for farmers.
“What I would anticipate here,” the former trade official said, “is a very, very robust negotiation.”
And when it comes to negotiating with China, they added, every issue will be on the table, not just agriculture.
Trump is “not going to have trade in one compartment,” the former official said, and neither will China. Purchases of U.S. agriculture, they charged, could be tied to Chinese demands to preserve their access to purchasing U.S. farmland – which Trump has vowed to end – or efforts to construct Chinese electric vehicle factories on U.S. soil.
“They're going to have a bunch of things like that that they're going to ask for,” the official said.
Asked about Bessent’s phase one comments, Sen. Elizabeth Warren, D-Mass., stressed that the U.S. needs to learn from previous efforts to help workers adversely affected by trade.
“The money came way too late,” the Finance Committee Democrat said. Accordingly, policymakers need to ensure that any proposal that promises “a solution to the retaliation truly delivers, and delivers before those farmers are bankrupt.”
Chinese embassy spokesperson Liu Pengyu responded to a request for comment on Bessent’s remarks by telling Agri-Pulse in an email that “the essence of China-US economic and trade cooperation is mutual benefit and win-win, and there are no winners in trade wars and tariff wars.”
Pengyu added that “China will firmly safeguard its sovereignty, security and development interests.”
