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China and U.S. are a Long Way From Ending Trade War
The tenor of Sino-U.S. negotiations is heartening but “we’re still a long way” from resolving the trade war between the world’s two largest economies, said Agriculture Secretary Sonny Perdue at a cattle industry conference. Meanwhile, China was following through on a pledge, announced at the White House, to buy U.S. soybeans, with some trade sources putting the purchases as high as 4 million tonnes, worth $1.35 billion.
President Trump has set a March 1 deadline to increase tariffs on Chinese products if there is no agreement. In a letter last week, Chinese President Xi Jinping told Trump that he hoped negotiations would continue “in a spirit of mutual respect and win-win cooperation.”
“We’d love to see a comprehensive, major relationship with China restored,” said Perdue on Friday at the Cattle Industry Convention in New Orleans. The administration imposed tariffs on a wide range of Chinese goods as leverage for reform of China’s trade policies, which the U.S. says include theft of intellectual property and forced transfer of trade secrets. Perdue told reporters that an agreement between the nations must include enforcement provisions. “We’re a long way” from a final package, he said. “We were heartened by the spirit of negotiations.”
Chinese Vice Premier Liu He said during a meeting with Trump that China would buy 5 million tonnes of U.S. soybeans. Trump greeted the announcement as a sign of good faith.
State-owned COFCO Group said it purchased “millions of tonnes” of soybeans in a notice appearing on Saturday in Asia. Trade sources told the market news agency AgriCensus on Friday that “at least 2.5 million (tonnes) had been bought by lunchtime in Chicago, with some estimates as high as 4 million.” The cargoes would be worth around $1.35 billion at current prices on the futures markets.
China used to be the top customer for U.S. farm exports, especially soybeans, with total purchases around $21 billion a year. This year, the USDA says it will rank fifth, with purchases of $12 billion. U.S. soybean exports, as well as market prices, slumped with the loss of China as a buyer. Brazil topped $100 billion in exports for the first time in 2018 because it is China’s supplier of choice.
Some analysts are wary that China will blunt U.S. demand for structural changes by ramping up its purchases of U.S. goods. After all, one of the administration’s unwavering demands is for a smaller trade deficit with China. U.S. farm groups have said little about China’s promise to buy more U.S. agricultural products. Before two days of talks between U.S. and Chinese trade officials last week, the National Pork Producers Council called for a speedy end of the trade war and for China to purchase $3.5 billion of U.S. pork over five years. China used to be the No. 3 market for U.S. pork exports.
China nearly offset sharply smaller purchases of U.S. soybeans with vastly larger purchases of the oilseed from Brazil, according to Chinese customs officials. Chinese officials will encourage larger domestic production to reduce reliance on soybean imports in coming years, according to Chinese media. The campaign, including higher subsidies for soybeans as an inducement to growers, would boost production by 3 million tonnes by 2022, compared with production of 16 million tonnes in 2018. By contrast, soybean imports are estimated at 90 million tonnes this marketing year. In the 2017/2018 marketing year, before trade war, China imported 94 million tonnes of soybeans.
An Iowa State University economist says Chinese tariffs will cost U.S. hog farmers $1 billion a year, or $8 per head, in sales. U.S. soybean exports are forecast for less than 52 million tonnes this marketing year, compared with nearly 58 million tonnes in 2017/2018. The U.S. soybean stockpile is expected to more than double this year, to nearly 1 billion bushels.
To listen to a WIBW audio recording of Perdue’s news conference, click here.