The Novel Voronavirus outbreak and its potential ramifications have lowered China’s consumption, more than offsetting any potential positive impacts from the US-China trade truce. China’s consumption is lowered modestly based in part on the initial impacts of the CV outbreak, including lengthened factory shutdowns due to the extended Lunar Holiday. Current impacts include a slowdown across the entire textile sector as travel restrictions and plant shutdowns have reduced commercial activity, and to a lesser extent, a slowdown in consumer demand for apparel and other retail products. The unknown duration and severity of these effects overshadows 2019/20 consumption developments since last month’s forecast.

In contrast, the recently signed trade agreement between the United States and China has reduced uncertainty, as the threat of escalating trade actions (negatively affecting the cotton sector) is replaced, at least in the short term, by greater potential for easing of trade measures put in place during the dispute. By reducing uncertainty, the trade agreement positively impacts expected income growth in CY 2020 and world cotton consumption. Note that a recent reduction in some retaliatory duties by China did not specifically benefit the cotton sector.