What’s the Import Performance of American Dairy Products under the Sino-US Phase One Trade Agreement?

After China-US trade war lasting for nearly two years, on Jan. 15, 2020, China's Vice Premier Minister Liu He signed the phase one trade agreement with U.S. President Trump. It mentions that China will increase the import of American products valued at 200 billion US dollars based on the level in 2017, including agricultural products worth 32 billion US dollars. Additionally, American dairy products exported to China are subject to easier market access and more efficient registration approval (please click here for the detailed).

The importation of American dairy products from Jan. to May 2020

Affected by the COVID-19 pandemic, the importation of US dairy products did not sharply increase after the agreement signed, and its import value even declined from January to February this year. Fortunately, things went better starting from March and the import volume nearly doubled in May compared with the same time last year. According to Dairyinfo, the exportation of American dairy products achieved remarkable performance since May this year, especially for skimmed milk powder and lactose ^[1]. It is noteworthy that the amount of skimmed milk powder exported to China in May is five times higher than that in 2018, and the exportation volume of whey to China represents 153% YOY growth.

The volume of American dairy products exporting to China (unit: thousand tons)

Data source: GAC data

The value of American dairy products exporting to China (unit: million US dollars)

Data source: GAC data

Will the dairy trading keep upward trajectory?

China was making efforts to realize the goal set in the phase one deal and minimize the negative impacts caused by COVID-19. During the first half of 2020, China updated the American manufacturers eligible for dairy and infant formula importation. Besides, in May this year, the competent authority unveiled a new product standard for deproteinated dairy mineral lactose powder, which provides the regulatory reference for such dairy products exported from America ^[2]. From the perspectives of American chamber of commerce, they also appreciated the current achievements made by the phase one trade deal and hope it could be further developed ^[3].

However, the bilateral trade is closely associated with the national relationship. Escalating tensions between the two countries in recent months brought into question the fate of the phase one trade deal. On Jun. 22, White House trade advisor Peter Navarro said the trade deal with China is “over.” Although US President Donald Trump swiftly confirmed on Twitter that the deal was “fully intact” and later Navarro also made clarification, it is hard to say whether US government will make any unexpected decision.

On Jul. 21, the United States government forced the Chinese consulate in Houston to cease operations. Later on Jul 24, China ordered the closure of the United States consulate in Chengdu as tit-for-tat. CNBC reported that the relations between US and China have been at their worst in years.