The Office of the U.S. Trade Representative on Friday announced it would kick off an investigation into China’s purchases under the Phase One agreement signed during President Donald Trump’s first term.
Under the agreement, Beijing agreed to increase its purchases of U.S. products by $200 billion across 2020 and 2021 from 2017 levels. China fell well short of its commitments, importing less even than in 2017. Agriculture, however, was a rare bright spot. While Beijing bought between 77% and 83% of the $80 billion two-year target, according to an analysis by the Peterson Institute for International Economics.
“The initiation of this investigation underscores the Trump Administration’s resolve to hold China to its Phase One Agreement commitments, protect American farmers, ranchers, workers, and innovators, and establish a more reciprocal trade relationship with China for the benefit of the American people,” U.S. Trade Representative Jamieson Greer said in a statement.
The probe is being launched under a legal authority known as Section 301, which Trump used as a justification to raise tariffs on Chinese products during his first term.
As part of its investigation, USTR will open a public comment period, with submissions due in December. It will also hold a public hearing Dec. 16, according to a Federal Register notice.
The probe comes the same day as Greer and Treasury Secretary Scott Bessent are meeting with Chinese counterparts in Malaysia, and less than a week before a scheduled meeting between Trump and Chinese President Xi Jinping. A tariff detente negotiated between the two countries to lower triple-digit tariffs earlier this year is set to expire next month.
Both sides have ratcheted up tensions in recent weeks ahead of the latest round of talks, with the U.S. adding to its list of Chinese entities subject to U.S. trade restrictions, China expanding its export controls on rare earths, and Trump threatening new 100% duties on Chinese products.
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Administration officials have frequently suggested that the U.S. should continue to hold China accountable for the missed purchases under the Phase One deal. Bessent raised the idea of enforcing the Phase One deal's purchase commitments during his nomination hearing in front of the Senate Finance Committee earlier this year.
Just this week, Agriculture Secretary Brooke Rollins raised the Phase One deal in an interview with CNBC and blamed President Joe Biden for not pressing Beijing to make good on its promises.
However, the Peterson Institute analysis notes that China was never on track to meet its commitments and had fallen behind even before Biden took office in 2021, in part due to the COVID-19 pandemic.
Where China bought more agricultural commodities than would have been expected, such as for corn, pork, wheat and sorghum, it was in large part because a swine flu outbreak had decimated Chinese pork production and it was rebuilding its herds – not because of any political imperative.
But multiple agricultural groups have been pushing the administration to hold China accountable to the Phase One deal. The National Potato Council, for example, applauded the investigation. The Phase One Agreement, the group said, concluded a two-decade effort to open the Chinese market to U.S. exports.
"[W]e anticipated significant exports to China. Unfortunately, in the five and a half years since the agreement was reached, not a single container of U.S. chipping potatoes has been exported to China, nor has a single facility been approved by their government to use them," NPC CEO Kam Quarles said in a statement.
"We are pleased that the Trump Administration is taking the necessary steps to ensure our trading partners honor their commitments," Quarles added.
The U.S. rice industry has reported similar non-tariff barriers, resulting in less than 100 tons in exports to China since the 2020 deal, according to a statement.
Jim Sutter, CEO at the U.S. Soybean Export Council, told Agri-Pulse earlier this year that he thought the administration could do more on that front.
Sutter told Agri-Pulse on Friday, however, that work should now be focused on negotiating a new agreement.
"I think an investigation today of that agreement from more than 5 years ago will show that full implementation didn’t happen," Sutter said in an email, but added, that his "preference today would be that our efforts are focused on creating a new agreement that is a win-win for both U.S. farmers and Chinese end-users."
Former U.S. trade negotiator Wendy Cutler told Agri-Pulse via email on Friday that the timing of the latest probe is no coincidence and is likely a negotiating gambit by Washington to demonstrate its negotiating leverage – its ability to hike tariffs further.
“Since the major non-compliance issue surrounding the Phase One agreement was China’s failure to live up to its purchasing commitments, this new U.S. move could put increased pressure on Beijing to buy more U.S. soybeans and planes,” Cutler said.
“Washington seems to be once again reminding Beijing of its potential leverage,” Cutler added.
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