Trade

News articles over the past several days have highlighted heightened U.S. trade policy risks and recent declines in the price of corn and soybeans.  Farm state Senators expressed their concern regarding executive branch trade policy, and its impact on the U.S. agricultural sector, to Commerce Secretary Wilbur Ross at a recent Finance Committee hearing.  Meanwhile, Secretary of Agriculture Sonny Perdue indicated in a recent opinion column that, “The U.S. has to stand up to China’s abusive trade practices like intellectual property theft.  And we won’t leave farmers to face Chinese bullying alone.”

In conjunction with positive early season crop condition ratings, an ongoing and escalating trade dispute between the U.S. and China put negative pressure on corn and soybean prices Tuesday.  Meanwhile, The Wall Street Journal indicated that the administration is ‘working on measures that will have the backs of farmers,’ as the trade dispute unfolds.  Separately, farm state lawmakers stressed the importance of global markets for agricultural producers, who have already been struggling with lean farm income.

Bloomberg News reported on Friday that, “Trade tensions between the U.S. and China ratcheted higher after the Asian nation said it will follow through on plans to levy tariffs on a range of American farm goods including soybeans and corn.”

Over the past several days, the U.S. Department of Agriculture has released a handful of updates relating to U.S. agricultural trade.  The recent information includes updated projections for fiscal year 2018 agricultural exports, as well as the latest monthly trade data.  As trade policy uncertainty persists, today’s post provides a brief overview of the recent trade information.

Towards the end of May, positive news regarding U.S. trade policy began to emerge for U.S. farmers: China canceled its anti-dumping measure on U.S. sorghum imports; the U.S. issued a  joint statement indicating that China would purchase more U.S. exports, including “meaningful increases” in agricultural products; and, the U.S. suspended its threat to impose tariffs on $150 billion in Chinese imports while negotiations with China continued.  However, more recent trade developments appear to be less sanguine for U.S. farmers and ranchers, which is the subject of today’s update.

Late last week China canceled its anti-dumping measure on U.S. sorghum imports. Meanwhile, after two days of trade talks in Washington, D.C., China and the U.S. issued a vague joint statement indicating that China would purchase more U.S. exports, including additional agricultural and energy products.  And on Sunday, Members of the President’s Cabinet provided conflicting perspectives on whether the U.S. would move forward on implementing tariffs on Chinese imports. However, news reports Monday indicated that the tariffs had been “suspended.”

Anthony Harrup, Robbie Whelan and Paul Vieira reported on the front page of today’s Wall Street Journal that, “President Donald Trump’s plans to rewrite the North American Free Trade Agreement this year looked unattainable Tuesday after negotiators appeared too far apart to strike a deal before a deadline this week.”

The United States and China are set to continue discussions this week over their ongoing trade disputes.  Meanwhile, China has increased inspections of U.S. pork imports while Chinese buyers continue to cancel U.S. soybean purchases.  Also last week, the World Agricultural Outlook Board updated its forecasts for global soybean production and trade. 

Late last week, the U.S. Department of Agriculture released updated agricultural trade data for the first half of this fiscal year (October – March).  Meanwhile, President Trump sent members of his senior economic team to China for trade negotiations, but those talks ended Friday, “with no deal and no date set for further talks.”  Since April, China has canceled and curtailed purchases of key Corn Belt commodities.  Today’s update highlights recent news items that explore these developments in greater detail.

On Tuesday, Wall Street Journal writer William Mauldin reported that, “President Donald Trump’s top trade official wants to finish a renegotiation of the North American Free Trade Agreement by the middle of the month to get a revised pact to a vote in Congress by the end of this year.”

In addition to the concern expressed last week by Senate Agriculture Committee members to Agriculture Secretary Sonny Perdue regarding executive branch trade actions, recent news items continue to highlight the implications of ongoing trade disputes between the U.S. and China, particularly as it relates to sorghum and soybeans.

China recently announced anti-dumping measures on U.S. sorghum.  Meanwhile, potential action by China on U.S. soybeans continues to concern farm state lawmakers and agricultural producers alike.  Today’s update looks at recent news articles that explore these issues, and their potential implications, in greater detail.

On Monday, President Trump noted that ongoing trade turbulence with China could adversely impact U.S. agricultural producers already hampered by a sluggish U.S. farm economy.  The President has asked the U.S. Department of Agriculture for options to assist farmers negatively impacted by the recent trade developments.  Meanwhile, Secretary of Agriculture Sonny Perdue faced questions from farm state lawmakers about trade issues, and potential responses, at a Senate hearing on Wednesday morning.

Today’s update includes a brief explanation of recent trade tariff action taken by the U.S. and China.  The trade uncertainty unfolds as agricultural producers anticipate another year of stagnant farm income, and while robust production of corn and soybeans in recent years has made exports an important component of demand.  Overall, USDA has noted that agricultural exports account for 20 percent of U.S. farm income.  Meanwhile, President Trump has instructed Secretary of Agriculture Sonny Perdue to “implement a plan to protect our farmers and agricultural interests” as the trade tussle continues.

Since withdrawing from the Trans-Pacific Partnership on his first working day in office, and formally opening the North American Free Trade Agreement to the renegotiation process, President Trump’s rhetoric on trade has perhaps caused more anxiety among agricultural producers than actual executive branch action.  However, implementation of concrete trade policy from the Administration began to emerge in January of this year when the U.S. slapped tariffs on imports of solar panels and washing machines.

A recent report from CoBank pointed out that trade worries are clouding the economic outlook for U.S. farmers and ranchers.  And, a recent report from Purdue University demonstrates that potential trade retaliation measures on U.S. soybeans by China could be costly.  Today’s update looks briefly at these two reports, as well as other news articles that highlight ongoing trade issues in the farm sector.

Charles Clover, Lucy Hornby and James Kynge reported on Friday at The Financial Times Online that, “Beijing signalled its readiness to go toe-to-toe with US President Donald Trump’s campaign of tariffs against China on Friday, proposing new levies on 128 American imports that heightened market fears of a looming trade war between the world’s largest economies.  China’s response to Mr Trump bore the hallmarks of a carefully calibrated warning. Beijing said it was planning tariffs on about $3bn in imports, including a 15 per cent tariff on US steel pipes, fresh fruit and wine, and a 25 per cent tariff on pork and recycled aluminum.”

The Wall Street Journal reported on Wednesday that, “China is preparing to hit back at trade offensives from Washington with tariffs aimed at President Donald Trump’s support base, including levies targeting U.S. agricultural exports from Farm Belt states, according to people familiar with the matter.”

On Thursday, President Trump implemented tariffs on steel and aluminum, an action that had been anticipated since last week.  Today’s update explores recent news items that highlight the potential negative impact the executive branch action could have on the U.S. farm sector.  Although Canada and Mexico were exempt from the new tariffs, if other countries, particularly China, take retaliatory trade measures based on U.S. trade policy, negative short-term and long-term impacts could be expected for U.S. farmers.