The United States and China are engaged in discussions to reduce tariffs on specific goods, including American energy and agricultural products, as well as Chinese inputs for manufacturers. These discussions are seen as a potential indicator that the upcoming leaders' summit next week could lead to an extension of the one-year trade truce established in October 2025.
Sources familiar with the matter suggest that these moves are expected to align with a prior plan for reciprocal tariff cuts on approximately $30 billion worth of trade. Most-favored-nation rates may be applied to some items from China. The significance of agriculture in these talks is highlighted by the possibility of representatives from the state-owned food trading firm Cofco joining Chinese President Xi Jinping during his meeting with US counterpart Donald Trump. Additionally, a CEO delegation, potentially including over a dozen firms, is being considered.
While the scope of such a deal would be limited compared to the bilateral trade volume, which exceeded $400 billion in the first eight months of the year, it would signal continued engagement between the two economic powers. An agreement would also demonstrate the ability of Washington and Beijing to maintain stable ties despite growing differences on issues like artificial intelligence, export controls, and Taiwan. It would also indicate that the Board of Trade, established during Trump's meeting with Xi in Beijing in May, is capable of delivering results.
China is reportedly on track with its commitment to purchase 25 million tons of US soybeans annually through 2028, having recently passed the halfway mark for the current year. Beijing has also pledged to buy at least $17 billion in US agricultural products annually, in addition to soybean purchases, with the target prorated for 2026, as announced by the White House in May. US Trade Representative Jamieson Greer has expressed expectations for announcements regarding agriculture and non-tariff barriers related to agriculture during Xi's visit.
Financial analysts anticipate that lower Chinese tariffs on US LNG and crude would improve netbacks for US exporters and reduce costs for Chinese buyers, potentially increasing US LNG shipments to China and firming Henry Hub prices. For crude, China could increase purchases of US grades, shifting trade flows. Reduced agricultural tariffs would reopen or expand the Chinese market for US soybeans, corn, sorghum, wheat, and possibly pork, which would be bullish for CBOT grains and oilseeds, particularly soybeans. Such tariff reductions would also create competition for Brazilian and Black Sea exporters.
