What Is The New U.S.-China Trade Deal and How Will It Affect Exporters?

On May 12, Wilbur Ross, the U.S. Commerce Secretary, announced that the U.S. and China have reached a new trade deal with four components that are supposed to boost U.S. exports and close America’s trade gap with China. The questions at hand are 1) what does this trade deal mean? and 2) how will this help U.S. exporters?

1. China Lifts Ban on U.S. Beef Imports. Since 2003, China has banned U.S. beef imports because of the outbreak of mad cow disease. Lifting this ban will open a $2.5 billion market to American beef exporters giving them more access to the growing Chinese middle class. After 13 years of being locked out of the Chinese market, American beef exporters will now have access to China’s 1.4 billion consumers.

2. U.S. Allows Importation of Chinese Cooked Chicken. The U.S. has agreed to allow Chinese imports of cooked chicken. This trade deal is only focused on cooked chicken rather than raw chicken because of China’s reputation for failed food-safety inspections: the U.S. wants to make sure that the Chinese demonstrate equivalence to U.S. safety inspections. This new trade deal did not address the 2015 Chinese ban of chicken imports from the U.S. after an outbreak of the avian flu in the Midwest, allowing for the blockage of U.S. chicken exports to China.

3. Chinese Import of Liquefied Natural Gas. The U.S. has invited the Chinese to import U.S.-produced liquefied natural gas. The Chinese need natural gas in order to reduce their dependence on coal and combat the country’s extensive air pollution. The Energy Department has authorized shipments of natural gas from the U.S. of 19.2 billion cubic feet per day to China. Although this expansion could lead to higher prices for U.S. consumers, this component of the new trade deal would provide a major market for American exporters. Helium is a highly sought after liquefied natural gas. China uses helium in its development of the nuclear fusion process, which is a way to produce natural resources and harness energy.

4. U.S. Biotechnology & Credit Cards. The U.S. has agreed to allow the Chinese access to the U.S. banking market if the Chinese comply with normal U.S. rules. Under this new trade deal, Chinese financial institutions, some of the largest in the world, will be treated the same way as other foreign banks doing business in the U.S.

The Trump Administration claims that this deal will be critical in advancing and boosting U.S. exports and states that any concrete progress is better than no progress at all. Critics say that this deal is not significant because these changes have been long promised by the Chinese and there is not anything in this deal to suggest China is going to become more open to U.S. manufactured exports. Either way, this trade deal will affect American exporters, it is just unclear how great the
impact will be.