AgWatch


A 90-Day Ceasefire With China Over Trade: Now What?

SARA WYANT

WASHINGTON, D.C.
   Farm and trade groups expressed relief after President Donald Trump and Chinese President Xi Jinping met and reportedly pledged to come together and end a trade war that’s been causing billions of dollars in lost sales for U.S. farmers and ranchers. 
   US negotiators, led by U.S. Trade Ambassador Robert Lighthizer, have 90 days from a self-imposed Dec. 1 deadline to figure out exactly what was promised and what can be delivered.
   A lot of details appear to be somewhat fluid.
   Trump agreed during the sidelines of the G20 talks in Argentina to hold off on a planned increase in the rate on tariffs he imposed on China. In return, the White House said, China agreed to “immediately begin negotiations on structural changes with respect to forced technology transfer, intellectual property protection, non-tariff barriers, cyber intrusions and cyber theft, services and agriculture.”
   That promise by Xi was key. National Economic Council Director Larry Kudlow stressed to reporters on Tuesday there would be no chance of a deal with China if the country refused to stop trying to appropriate U.S. intellectual property.
   Trump told reporters that the Chinese pledge would have an “incredibly positive impact” on U.S. agriculture and other sectors. 
   “China will be opening up.  China will be getting rid of tariffs.  You know, China right now has major trade barriers – they’re major tariffs – and also major non-tariff barriers, which are brutal.  China will be getting rid of many of them.  And China will be buying massive amounts of product from us, including agricultural from our farmers – tremendous amount of agricultural and other products," the president told reporters during his trip back from Argentina.
    Monday, the president tweeted this:
   “Farmers will be a very BIG and FAST beneficiary of our deal with China. They intend to start purchasing agricultural product immediately.   We make the finest and cleanest product in the World, and that is what China wants. Farmers, I LOVE YOU!”
   The U.S. was scheduled to raise the tariff rate on $200 billion worth of Chinese goods from 10 percent to 25 percent. That won’t happen now for at least another 90 days as the countries continue to negotiate.
   What happens over the next 90 days will be key, but the announcements already delivered a bump in the commodity markets and optimism in farm country. 
   “This is the first positive news we’ve seen after months of downturned prices and halted shipments. If this suspension of tariff increases leads to a longer-term agreement, it will be extremely positive for the soy industry,” said John Heisdorffer, American Soybean Association president.
   Farmers for Free Trade Executive Director Angela Hofmann welcomed the news, but said that, “While farmers are cautiously optimistic about this development, they are also keenly aware that they are still subject to the existing painful retaliatory tariffs and lost markets that have hurt their recently harvested crops and income.”
   Former Louisiana Rep. Charles Boustany, a spokesman for the group Tariffs Hurt the Heartland, said, “Agreeing not to raise tariffs on American businesses, farmers and consumers is an encouraging first step. These tariffs are taxes that Americans pay, and avoiding a massive tax increase on January 1st is welcome news that must be followed up by rolling back the tariffs currently in place.”
   The U.S. first hit China months ago with tariffs on steel and aluminum, which resulted in Chinese retaliatory tariffs on pork, dairy, and other commodities. The U.S. then levied $50 billion in import taxes on China to punish it for intellectual property theft and policies of forced technology transfer. China responded in kind, including a 25 percent tariff on U.S. soybeans, wheat, sorghum and corn.
   The next escalation was supposed to be a new round of U.S. tariffs on $200 billion worth of Chinese goods. It’s those duties that were scheduled for a rate hike. That could still happen, the White House warned; the rates will go up in 90 days if no final deal is reached.
   Primarily blaming Chinese tariffs, the USDA’s Economic Research Service slashed the fiscal year 2019 forecast for U.S. agriculture exports by $3 billion.    
   “Soybean export volumes are down because of declining Chinese purchases from the United States as a result of trade tensions, and as a record U.S. crop continues to pressure soybean prices lower,” the ERS said in the report.
   U.S. soybean exports are now forecast at $18.7 billion in FY 2019, down from the August prediction of $21 billion. The U.S. exported $21.6 billion worth of soybeans to China in FY18. ∆
   SARA WYANT: Editor of Agri-Pulse, a weekly e-newsletter covering farm and rural policy. To contact her, go to: http://www.agri-pulse.com/
MidAmerica Farm Publications, Inc
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