Lingling Wei, Bob Davis, William Mauldin and Josh Zumbrun reported in Friday’s Wall Street Journal that, “President Trump has agreed to a limited trade agreement with Beijing that will roll back existing tariff rates on Chinese goods and cancel new levies set to take effect Sunday as part of a deal to boost Chinese purchases of U.S. farm goods and obtain other concessions, according to people familiar with the matter.
“Mr. Trump met top economic and trade advisers on the agreement for an hour Thursday, and senior administration officials were making calls to tout the outlines of an agreement, the people said.
Michael Pillsbury, an adviser to the president, said he spoke with Mr. Trump, who said the deal calls for China to buy $50 billion worth of agricultural goods in 2020, along with energy and other goods. In exchange the U.S. would reduce the tariff rate on many Chinese imports, which now ranges from 15% to 25%.
Friday’s article explained that, “The Wall Street Journal reported earlier Thursday that the U.S. side has offered to slash existing tariff rates by half on roughly $360 billion in Chinese-made goods, in addition to canceling the tariffs on $156 billion in goods that Mr. Trump had threatened to impose on Sunday. That offer was made to Beijing in the past five days or so.
“Should Beijing fail to make the purchases it has agreed to, original tariff rates would be reimposed. Trade experts call that a ‘snapback‘ provision, though the president didn’t use that term, Mr. Pillsbury said.”
The Journal writers added that, “The limited trade pact could help revive U.S. agricultural exports to China. Such sales had collapsed over the past year and a half, with China retaliating against U.S. tariffs by halting farm purchases. U.S. farm exports fell from as much as $25 billion in recent years to below $7 billion in the 12 months through May, according to Commerce Department data.
“Farm exports to China have begun to climb in recent months as the two sides reached a truce, but remain nearly 60% lower than their pre-trade war peak.”
Ana Swanson, Alan Rappeport and Keith Bradsher reported on the front page of Friday’s New York Times that, “Mr. Trump is expected to make an official policy announcement on Friday about progress toward a trade deal he initially announced in October. However, both sides have said before that they were on the verge of an agreement, only for the talks to collapse. The text of the agreement has not been finished and it is unclear whether China has agreed to all of the details included in the plan.”
The Times article noted that, “China has been willing to discuss purchases of American agriculture, especially since a disease has devastated its swine population and led to spiraling pork prices. But in previous discussions, Chinese negotiators had pushed back against promising set purchase amounts far into the future, saying such an arrangement could anger its trading partners and violate its commitment to the World Trade Organization to treat all members equally.”
Eli Stokols and Don Lee, writing in Friday’s Los Angeles Times, reported that, “Trump met in the afternoon with U.S. Trade Representative Robert Lighthizer, who presented the outlines of the partial deal, according to the official. The president approved. There was no confirmation from the Chinese, although officials have spoken more optimistically in recent days of their talks with the U.S.; they are expected to comment on the trade talks overnight and could confirm a deal on Friday.”
Meanwhile, Bloomberg’s Michael Hirtzer and Mike Dorning reported on Thursday that, “An initial U.S.-China trade accord includes a promise by Beijing to buy more American agricultural goods. That’s likely to spark relief and questions for farmers and crop traders.
“President Donald Trump signed off on a so-called phase-one trade deal, for which terms have been agreed but the legal text has not yet been finalized, according to people familiar with the matter. An announcement is expected on Friday Washington time.
Farmers and agriculture traders are hungry for more details. The more than yearlong tariff spat between the two nations weighed on commodity prices and upended global crop shipments, benefiting Brazil as an alternative supplier. While grower incomes have been insulated by U.S. government aid, many in the agriculture community have said they’d rather see the return of trade flows into China than continue to be supported by federal payments.
The Bloomberg article noted that, “Market watchers will want to know whether China has committed to a hard value for shipments. U.S. Agriculture Secretary Sonny Perdue said Thursday that Chinese officials told Trump that they would buy $40 billion to $50 billion worth of American farm goods, but were reluctant to commit to contracts. Exactly how much China could buy and over what period are crucial questions.
“Soybean, corn and wheat futures extended rallies Friday on optimism China will substantially increase U.S. agricultural purchases. Soybeans, often viewed as a bellwether for trade talks, hit their highest intraday level in more than three weeks, rising 1.8%. Corn advanced 1.7% and wheat gained 0.8%. Soybean meal in China, used in animal feed, lost 1.4% as more soybean supplies loomed.”
The Bloomberg article added that, “The value of U.S. agricultural exports to China in 2018 was roughly cut in half from the previous year to $9.1 billion, down from $19.5 billion in 2017. For soybeans alone, the value of shipments sank to $3.1 billion in 2018 from $12.2 billion in 2017, according to Department of Agriculture data.”
Source: Keith Good, Farm Policy News
Source: Chris Clayton, DTN
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