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China-U.S. Deal Sets Up Brazil and Saudis Among Likely Losers

Steve Matthews
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China-U.S. Deal Sets Up Brazil and Saudis Among Likely Losers

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Brazil, Saudi Arabia and Australia are among the major economies exporting agriculture and energy products that are most likely to lose orders from China as a result of that nation’s $200 billion commitment to buy from the U.S. announced last week, according to a Bloomberg Economics analysis.

While Chinese officials have said the U.S.-China trade agreement won’t affect demand for goods from other countries, shifting purchases from other countries could result over time, economists Maeva Cousin and Tom Orlik wrote in an analysis Wednesday.

“The temptation for China will be to hit the targets on higher imports from the U.S. by switching purchases from elsewhere,” they wrote. “That’s especially true for imports of energy and agricultural products, which are much the same no matter where they come from.”

Among major economies selling energy and farm products, Brazil, Saudi Arabia and Australia are most exposed because Chinese purchases across categories covered by the deal representing more than 10% of their total exports.

Export Impact

Switching production for manufactured products may be more difficult because of complex supply chains and exacting specifications.

Looking beyond the world’s biggest economies, Angola, the Republic of the Congo and Mongolia face the highest risk, with 57%, 49% and 47% of their total exports in 2017 coming from sales to China in categories covered by the deal, according to the report.

President Donald Trump signed a deal with Chinese officials last week that commits China to do more to crack down on the theft of American technology and corporate secrets by its companies and state entities, while outlining a $200 billion spending spree to try to close its trade imbalance with the U.S.

While the announcement of the U.S.-China deal has helped to lift markets, the deal could eventually result in worries at other producers.

“With other countries set to pick up at least part of the bill, relief could quickly turn to consternation,” according to the analysis.

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To contact the reporter on this story: Steve Matthews in Atlanta at smatthews@bloomberg.net

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Ana Monteiro

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