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Chinese Trade Talks Resume, but Don’t Hold Your Breath

Trump wants an "Excellent Deal," ASA calls for tariffs to end

AgNook Editor posted by AgNook Editor
March 29, 2019
in Business & Inputs, Crops
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Chinese Trade Talks Resume, but Don’t Hold Your Breath

Could we be close to a trade deal?

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Trade talks between the US and China are resuming this weekend. Though both sides still appear open to reaching a deal, neither seem willing to completely drop their tariffs. This has been especially distressing for US soybean growers, and the American Soybean Association have made a public call out for President Trump to get the Chinese to drop their 25% tariff on US soybeans. Trump isn’t settling for anything less than an “Excellent deal,” so US soybean farmers shouldn’t hold their breath.

Tariffs on China Here to Stay

According to Steve Holland of Reuters, the US may continue to tariff Chinese goods as a way to ensure that the country is keeping in compliance with trade agreements. President Trump has said recently that the tariffs may remain for a “substantial period.”A trade deal with China is still far from wrapped up, but some agreements between the two countries have been made. US trade representatives are traveling there to continue the talks.

Read more at reuters.com

Soybean Growers Unhappy

President Trump has already asked China to remove all tariffs on US agricultural products. He did so earlier in March. But as long as the US uses tariffs for leverage, China is going to do the same. And the American Soybean Association (ASA) is upset about that.

Wallaces Farmer published the stance of the ASA in an article called, Trump’s Plan to Keep Tariffs Unacceptable to Soybean Growers. The ASA believes any deal between the US and China should remove the 25% tariff on US soybeans.

“The president’s statement that the tariffs should remain in place to ensure China’s compliance with the terms of a deal, rather than being rescinded as a part of that deal, is confounding,” said Davie Stephens, ASA president and Clinton, Ky., soybean grower. “If reciprocal tariffs have generated current pressure to reach an agreement, why wouldn’t removing the tariffs and relieving that pressure be a necessary part of any initial deal? How can the U.S. and China reach any deal without doing so?

The ASA does understand that the US needs a way to enforce the provisions of a trade deal. They also understand that there needs to be some sort of “snap back” mechanism to reimpose tariffs if aspects of the deal are broken. However, they’re tired of soybeans being the collateral damage in the dispute.

The ASA says “good will” and “one-off” purchases of US soybeans aren’t enough. Any long term plans should mean guaranteed amounts of specific purchases over an extended period of time. Keeping the 25% tariff is not the same as full market access.

The ASA is right in their concern. US soybeans are suffering. China is the largest US soybean customer, prices are depressed, and we have high bean stocks- which will likely double before the 2019 harvest. Soybean growers need China reopened for soybean trade and the 25% tariff removed.

Read more at farmprogress.com

Another Round of Trade Talks

Trump has said that his top negotiators, US Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are headed to Beijing to continue the talks. Trump delayed the initial March 1 deadline to raise tariffs on $200 billion worth of Chinese imports from 10% to 25%.

“The deal is coming along nicely,” Trump said to reporters at the White House, adding that the China trip was intended “to further the deal.”

One aspect of a trade agreement that’s been particularly challenging is protecting US technology and innovation. Washington wants US companies to have more access to Chinese markets, wants China to reduce their industrial subsidies, and end practices that force the transfer of US technology to Chinese companies.

Since July of 2018, the US has imposed tariffs on $250 billion of Chinese goods. China has levied tariffs on $110 billion of US goods. Reporter Steve Holland of Reuters sums it up well.

The eight-month trade war between the world’s two largest economies has raised costs, roiled financial markets, shrunk U.S. farm exports and disrupted manufacturing supply chains.

Read more at reuters.com

Pressure is Mounting

Christopher Rugaber of the Associated Press also covered the upcoming Chinese trade talks in his article, “Trump team and China seek elusive deal as latest talks near.” This round of talks will be the eighth, and there are many issues still unresolved. They still have no timetable for removing tariffs, nor any measures for enforcing an agreement once one is made.

The trade war has damaged the economies of both countries, and pressure is mounting to reach a deal. A research provider called Rhodium Group has predicted that if the current tariffs remain in place until this coming fall, it will result in a $45 billion loss in US economic output for 2018.

Derek Scissors, a resident scholar at the American Enterprise Institute, says that China wants “Serious tariffs off the table.” The US wants the tariffs to disappear too, but feels it’s necessary to bring them back as a means of enforcement if a deal is broken. But China’s not going for that.

“It is inappropriate for China to see frequent guidance and monitoring from the United States,” said Dong Yan, a researcher at the Institute of World Economics and Politics of the official Chinese Academy of Social Sciences. “Enforcement should be in accordance with international conventions.”

It’s difficult for everyone to determine what the Trump administration wants, and the Chinese are being very cautious about giving up too much.

Read more at startribune.com

Nothing Less Than an “Excellent Deal”

Andrew Mayeda of Bloomberg wrote and article published on Western Farmer-Stockmen, and says that Trump won’t settle for less than an “Excellent deal” with China. US trade negotiators are in China now for talks, and top Chinese negotiator Vice Premier Liu He will travel to the US next week. US trade negotiator Robert Lighthizer seems fairly realistic.

In a radio interview this week, Lighthizer said he wants to get a deal, but he’s “not necessarily hopeful” one will happen. “We’re working on it,” Lighthizer told National Public Radio. “If there’s a great deal to be gotten, we’ll get it. If not, we’ll find another plan.”

The earliest possible date a finalized agreement between the two countries could happen is the end of April.

Trump Wants a Deal Before 2020

Trade-policy counsel at the R Street Institute Clark Packard says Trump really would like to wrap this up before the 2020 presidential election.

“The president is desperate for a deal. I don’t think he wants to go into 2020, running for re-election, without something here.”

Trump has been very optimistic about reaching an agreement, especially after the breakthrough they had a month ago where Trump decided not to ratchet up the tariffs. But Trump is willing to walk away. He’s done so with North Korea, and will probably do the same with China if things don’t go his way.

Read more at farmprogress.com

Tags: 2020 ElectionAmerican Soybean AssociationChinaexportsimportsSoybeanstariffstradetrade talksTrump

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