China Announces 25% Tariff on U.S. Soybeans, Other Ag Products04/04/2018
Most U.S. Ag products that are exported to China may soon have a twenty five percent levy added to their imported prices- as farmers and ranchers are now sitting right in the middle- fully exposed- between two economic heavyweights as they are charging full speed towards a very nasty trade war.
On Tuesday- as part of the U.S. response to China’s unfair trade practices related to the forced transfer of U.S. technology and intellectual property, the Office of the U.S. Trade Representative (USTR) published a proposed list of products imported from China that could be subject to additional tariffs- $50 Billion worth. Click here for the complete story.
Early this morning- the Chinese fired back. And soybeans are their headliner in that they plan on adding a 25% duty on the oilseed and its products.
The Asian nation plans to impose 25 percent duties on a slew of U.S. agricultural commodities such as soybeans, wheat, corn, cotton, sorghum, tobacco and beef, according to the Ministry of Commerce in Beijing. They are among 106 U.S. products targeted ranging from automobiles to chemicals and aircraft.
Yesterday afternoon- former Senator Max Baucus issued a statement under the banner of the Ag Coalition Farmers for Free Trade- foreshadowing what the Chinese announced this morning- “Farmers are going to get squeezed by this decision from all sides. First, the tariffs the U.S. announced today will make the ag equipment and inputs they rely on more expensive. Then they’ll face new tariffs on their exports when China retaliates.”
Bloomberg offered one take from an analyst that suggests this is an economic and political response- “China’s response carries both economic and political weight as agricultural states are major supporting regions for Trump,” said Monica Tu, an analyst at Shanghai JC Intelligence Co. “The tariffs on U.S. imports including soybeans is China’s response that matches the scale of proposed U.S. tariffs.”
Ag futures are tumbling with this news- and the Stock Market futures are also showing a big loss after the end of day rally yesterday on Wall Street.
BUT REMEMBER- while the market hates uncertainty- as this sorts itself out- the reality for our exports may or may not be as bad as we first fear.
Questions like- when tariffs will actually be imposed- how long- how easily will China be able to source Ag products- all these questions will be lived out in the immediate future.
Administration considering compensation plan
The Trump administration is working on ideas for compensating farmers who may be harmed by China’s retaliatory tariffs on U.S. commodities, including pork, nuts and fruit. Agriculture Secretary Sonny Perdue wasn’t ready to offer specifics to reporters during a tour yesterday in Michigan, but he says the plan will send a signal to China.
“We’re discussing that right now, but I’m not at liberty to talk about those kinds of things from a mitigation perspective,” Perdue said. “And at the proper time we will let China know they will not be able to affect our agricultural policies and our political decisions over trade by … holding agriculture hostage.”
Perdue was reacting to the $3 billion in tariffs that China announced Monday in retaliation for U.S. levies on steel and aluminum, but he also stood by President Trump’s separate action to punish China for intellectual property theft.