Since March, we’ve been watching a potential high-stakes trade war building between the United States and China—first over steel and aluminum and then, hundreds of other targets were added to lists that each side threatened to harm with painful tariffs or other restrictions. The lists included everything from soybeans to pork, apples to nuts.
Farmers and ranchers—who know they are usually one of the first targets of trade retaliation—were understandably nervous. Markets were depressed. And then some of those fears came true.
All U.S. exports to China halted on April 18 when the country levied an anti-dumping duty of almost 180 percent on U.S. sorghum, effectively stopping more than a dozen ships destined for Chinese customers.
But just one month later, China decided to scrap its anti-dumping and countervailing duty cases on U.S. sorghum, providing a signal that U.S.-Chinese trade relations are on the upswing once again.
“This is critical good news for U.S. sorghum producers and exporters, and U.S. agriculture as a whole,” said U.S. Grains Council President and CEO Tom Sleight. “Today’s development is also a step in the right direction for U.S.-China trade relations, and we hope it is a platform for further lessening of tensions and challenges facing U.S. grains exports to China.”
Just one day later, the U.S. and China agreed to a framework that could reduce the trade deficit by increasing China’s purchases of agriculture and energy products and will seek to address U.S. concerns about protection of intellectual property, according to a joint U.S.-China statement released by the White House Saturday.
President Donald Trump heralded the news on Twitter: “China has agreed to buy massive amounts of additional Farm/Agricultural Products—would be one of the best things to happen to our farmers in many years!”
Treasury Secretary Steve Mnuchin said the Trump administration is “putting the trade war on hold” while trying to execute the framework. Speaking on Fox News Sunday, Mnuchin said, “We are immediately going to follow this up with Secretary Ross going there with very hard commitments in agriculture where we expect to see a very big increase, 35 to 45 percent increases in agriculture this year alone. In energy, doubling the energy purchases.”
Mnuchin also said that “You could see $50 billion, $60 billion a year of energy purchases over the next three to five years.”
He admitted that the White House has specific industry targets but declined to disclose what they are. And that lack of specificity is prompting criticism that the Trump administration didn’t get as much as they originally bargained for, which was a $200 billion reduction in the trade deficit with China by 2020.
Mnuchin said the White House will be monitoring the progress, but would not be in control of the private sector transactions.
“Ultimately, these are not government to government transactions. It’s not a giant purchase order with us,” Mnuchin said. “This is about industry being able to have hard contracts and deliver these goods.”
Interestingly, USDA Under Secretary for Trade and Foreign Agricultural Affairs Ted McKinney was on the ground in China, along with 20 agribusiness and state and commodity group leaders, when the framework was announced.
Several months ago, USDA’s Foreign Agricultural Service had arranged meetings between U.S. delegates and representatives of Chinese companies in Guangzhou and Shenzhen. Despite the trade tensions that had been brewing, they elected to go ahead.
“We’re so glad we followed through because it’s been a widely successful visit,” McKinney reported during a call with U.S. reporters.
“We’ve already met with more than 100 Chinese buyers and had 180 meetings—and that’s just the first half of our time,” McKinney added.
But several analysts—while expressing support for the framework and the overall progress made—pointed to the need for more specifics.
“There is still an enormous amount of work that must be done to take this agreement from concept to reality and to deliver certainty and stability to farmers and ranchers,” noted Brian Kuehl, executive director of Farmers for Free Trade. Among other things, he called for U.S. officials to address China’s non-tariff barriers, retaliatory barriers related from steel and aluminum tariffs, finalizing the North American Free Trade Agreement and opening new export market opportunities.
“We need to pivot away from a focus on revisiting old agreements to opening new ones,” Kuehl said.
Iowa Soybean Association CEO Kirk Leeds said his group is “encouraged by the positive signs” coming out of the Trump administration and from China about possibly ending the trade war.
However, “we have very little in the way of details,” and he is “a bit skeptical of one of the claims that we are going to see 30 to 40 percent increase in exports of products to China.
“At the end of the day, products will be exported to China on price, quality and availability—three areas that Iowa soybean farmers have always had some advantage. We look forward to getting back into the business of exporting soybeans to China based on those three criteria,” Leeds added. “When we do, it will truly be positive news.”
Editor’s note: Agri-Pulse Editor Sara Wyant can be reached at www.agri-pulse.com. Agri-Pulse Editors Philip Brasher and Bill Tomson contributed to this column.
