China halts some U.S. Soy, Pork purchases threatening trade deal

China has reportedly paused some U.S. agricultural goods purchases following Trump's statement on Hong Kong's trade status, putting the trade deal between the two countries at risk. Yahoo Finance's On the Move panel discusses.

Video Transcript

- While this is unfolding, China is taking the opportunity to effectively jeer at the US, which has been critical of China's handling of Hong Kong protests, by calling the US-- calling out hypocrisy on the part of the US, according to some Chinese officials. China also is suspending some agricultural imports while all this is going on. Rick Newman, you have watched this whole China back and forth that we have seen here. How significant a point are we at in that back and forth, do you think?

RICK NEWMAN: Very significant. So China, obviously, is trying to get tougher than it has been on Hong Kong, revoking some of the rights of autonomy there. And we'll see what kind of crackdown is coming.

It probably will not be pretty, but they basically looked at or listened to President Trump's comments on Friday, when he said he was considering revoking, you know, special privileges between Hong Kong and the United States. And China basically seems to be saying, we don't care. And you know, President Trump-- that was not a real strong statement from him on Friday, and China does not seem to be intimidated.

And if you think about it, they're probably looking at what's going on over here and saying, we've really-- we may have the United States right where we want them-- terrible recession, still reeling from coronavirus, and now look at-- the whole country's on fire with racial protest. And Trump is increasingly weak as a leader in his own country. So I think we've gone from a remarkable turnaround, where the United States actually had pretty good leverage over China during the trade war-- we spent so much time talking about last year, and it looks like now maybe China is the one that has leverage.

- Rick, but if the Chinese don't follow through on the purchase of agricultural products, for a few-- several years, his base, the farmers, stood by him, the president. Would they now change their mind? Or would they continue to stick by him?

RICK NEWMAN: I'm not sure we know whether the farmers actually have stuck by Trump, because they really didn't get a chance to vote on anything during 2019, which, of course, is when the-- you know, all these trade restrictions really were starting to hurt. So I don't think we know.

But I mean, yet again, this is not good for Trump. I mean, he needs to be able to show something he can claim victory for. And he thought one of the things he would be able to declare victory on would be getting tough with China, getting sales up for our great patriot farmers, as he called them.

And I don't know if this-- I mean, we don't really know if this is-- China's deliberately stopping or reducing purchases of US exports for the long term, for the short term-- is it just temporary? Is it a temporary reaction to what Trump said on Friday, and then they'll kind of quietly go back to normal? We don't know how provocative they really want to be here. But I think Trump is very short on options, because what he-- I mean, he cannot impose more tariffs with everything that's going on in the markets and elsewhere in the world right now.

- Rick, is there a chance that China just pulls out of the trade deal entirely, ignores it, if they had this kind of leverage, and the US does make moves about Hong Kong?

RICK NEWMAN: My guess is they would not do that. They just would not abide by the terms of the trade deal, because if they're still in the deal, well, they can turn their agreements on or off or meter them up or meter them down as much as they want, based on other things going on in the world. If they just withdraw completely, that makes it easier for Trump to vilify them and say, look, they didn't abide by their agreements. Nobody should believe them when they make a deal.

I think they're much more clever than that. And if they really want to undermine the trade deal, which I'm not sure they do-- I mean, there's an argument to be made that China would actually prefer that President Trump get reelected than have to deal with Joe Biden at this point. So I don't think it's a given that they would rather see Trump lose. But I think they're just gonna be very crafty. And let's remember, they're a little bit ahead of us in recovering from the coronavirus outbreak and getting their economy back on track.