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China $21B behind commitments to US as virus, tensions threaten trade deal

China came up more than $20 billion short of its promised purchases of U.S. goods and services in the first quarter, putting in jeopardy its ability to fulfill its end of the "phase one" trade deal as the coronavirus pandemic squelches global demand and tensions rise between Washington and Beijing.

In exchange for scaled-back tariffs on Chinese goods, Beijing agreed in January to more than double its imports of a basket of 548 U.S. goods to the tune of an extra $200 billion-plus compared to 2017 levels throughout 2020 and 2021.

To hit its commitment, China would need to buy $11.93 billion of those goods every month, but such purchases totaled only $5.24 billion in March, according to new data from Panjiva, a business line of S&P Global Market Intelligence that provides news and analysis about global supply chains.

After purchases toward phase one commitments totaling $4.86 billion in January and $4.43 billion in February, according to Panjiva, China was $21.2 billion behind schedule for the first three months of the year.

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"With challenges including weak commodity prices and industrial closures in the U.S. as well as logistics disruptions it may prove challenging for China to get back on track this year," Chris Rogers, Panjiva's research director, said in a research note.

This all comes as the demand shock from the pandemic compounds tensions between the U.S. and China amid accusations from the White House that the coronavirus originated in a laboratory in Wuhan and Beijing downplayed the severity of its spread. China has vehemently denied those allegations, but President Donald Trump has threatened to reimpose tariffs as part of a package of sanctions.

"Phase one may fall apart," Erik Lundh, senior economist for the Conference Board, said in an interview. "I don't know if we'll be able to have the stuff to sell to them, and I don't know if China has the domestic demand for these goods, either. Everything has been thrown into limbo."

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

Rogers said exports of U.S. manufacturing goods to China fell 20.4% year over year in the first three months of 2020, including a 62.5% drop in pharmaceutical products exports. U.S. agricultural exports to China fell 13.7%. That latter figure comes even as the Chinese government said last month that it purchased $5.05 billion of U.S. farm goods in the first quarter, including a 2.1x increase in soybeans and a sixteenfold increase in pork.

Vehicle exports fell 58.7% to reach their lowest single month total since December 2018, Panjiva found.

Energy, however, saw a 76.9% year-over-year increase, including a 454% jump in refined oil product exports. Rogers warned that this may not last due to plummeting oil prices.

While the tensions and altered supply-demand dynamics could derail the phase one purchase commitments, a larger "phase two" deal is not out of the question, said Bill Reinsch, senior adviser at the Center for Strategic and International Studies.

"Maybe if someone ultimately comes up with some proof that [China] covered it up in a major way, that would change things," Reinsch said in an interview. "But that hasn't happened yet."

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Panjiva is a business line of S&P Global Market Intelligence, a division of S&P Global Inc.