|
How Long Will The Trade War With China Last?
SARA WYANT
WASHINGTON, D.C.
U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin recently returned from negotiations in Shanghai and they are expected to resume formal in-person conversations with their Chinese counterparts in September.
But increasingly, the trade war with China looks likely to drag on for several more months and potentially until 2021.
Goldman Sachs Group Inc said recently that their economists expect the ongoing trade war to increasingly lead to a U.S. recession and a resolution will not likely be reached before the 2020 elections.
President Donald Trump said twice in the past couple of weeks that disputes with China might rage on for another year or longer.
The most recent talks were “constructive,” Trump said, but stressed that the Chinese still weren’t living up to the promises they’d made. On August 1, Trump announced he would hit China with new 10% tariffs on about $300 billion worth of its goods on Thursday last week.
These are on top of those already imposed on $250 billion in imports. As a result, almost all imports from China will be included.
In addition, the Treasury Department has labeled China a “currency manipulator,” charging the country with weakening the yuan to make Chinese goods cheaper and weaken the effect of U.S. tariffs.
“They devalued at least 10 percent in the past 15 months,” Larry Kudlow, Trump’s national economic adviser, said Tuesday. “I must say they brought this on themselves.”
But China reacted sharply to the new U.S. actions. Xinhua News, a state-owned outlet, quoted a response from the People’s Bank of China: “The U.S. labeling is an arbitrary unilateral and protectionist practice, which seriously undermines international rules and will significantly impact the global economy and financial markets."
Meanwhile, China has retracted its latest goodwill gesture of exempting some Chinese importers from its own tariffs on U.S. soybeans.
Sharon Bomer Lauritsen, assistant U.S. Trade Representative for agricultural affairs and commodity policy, said last week that the Chinese have clarified that “any sales occurring after August 3 will no longer be exempt from those retaliatory tariffs. Now, we'll have to wait and see what that means."
But amidst all the angst and finger-pointing over the trade war, there was some seemingly good news.
On Aug. 13, the U.S. Trade Representative’s office said the new 10 percent tariffs would take effect as planned on some items Sept. 1 However, other items including cellphones, laptops, computer monitors, video game consoles and certain shoes and clothes would not be hit with the new duties until Dec. 15.
That same day the Chinese government announced – through state media – that telephone talks were held with Lighthizer and that they will talk again in two weeks.
Meanwhile, U.S. farm groups – who have largely been supportive of President Trump’s actions against China - are watching prices drop, commodity stockpiles mount and the possibility of long-term loss of key export markets. How long they will continue to support Trump politically remains to be seen.
“On the demand side, the longer the trade war lasts, the more that our U.S. soybean export pace will continue to fall behind and ending stocks will grow,” said Grant Kimberley, director of market development for the Iowa Soybean Association. “If the trade war continues into next year, we could see an excessive shift of acres into other crops which would could crest burdensome supplies of other crops.”
There is a massive push in the soybean sector to diversify and push into untapped or under-tapped markets. and that’s going to continue regardless of how long the Chinese tariffs remain in place, according to John Baize, president of John C. Baize and Associates and a consultant for the U.S. Soybean Export Council.
But it won’t be enough to make up for the market share farmers are losing in China, Kimberley tells Agri-Pulse.
“We’ve been diversifying a lot,” he said. “We’ve increased our exports to other countries … by just under 6 million metric tons … but that doesn’t offset (losses to China).”
So far this marketing year, the U.S. has shipped about 9.6 million tons of soybeans to China, less than half of the 20 million tons that U.S. officials say China has pledged to buy and just a pale shadow of the roughly 36 million tons that China had purchased by this time of the year, two years ago.
U.S. pork producers are hit with even steeper tariffs. China first hit the sector with a 25 percent tariff to counter U.S. 232 tariffs on steel and aluminum. Then China levied another 25 percent tariff in response to U.S. 301 tariffs that were meant to punish China for its efforts to acquire intellectual property. That’s on top of the existing 12 percent base tariff.
And the tariffs couldn’t come at a worse time, says National Pork Producers Council spokesman Jim Monroe. China is in the midst of battling outbreaks of African Swine Fever, destroying much of its herd to stop the spread of the disease.
“Unfortunately, it’s another situation where we’re not competing on a level playing field and we are not able to fully participate in what is an historic sales opportunity in China right now because of the struggles they’re having with ASF,” Monroe said. “Our producers are losing $8 per hog as long as this trade dispute lingers. That’s $1 billion on an annualized basis.” ∆
Editor’s note: Agri-Pulse Editor Bill Tomson contributed to this story.
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/
|
|