As a result of high-level trade talks a week ago, China has agreed to purchase 600,000 tons of soybeans grown in the USA. As a result of the purchase, the price of soybean futures in the US climbed by more than 1 percentage point on the Chicago Board of Trade.
The deal will result in the shipment of about 10 boatloads of soybeans, which will be spaced over the time period between October and December, all heading off to Chinese shores.
The announcement about the soybean purchase came on the heels of the bad news that Chinese trade officials had cancelled a scheduled visit to US farm states. Except for this one decision, trade talks had proceeded positively. More negotiations between the US and China are scheduled for October has the trade war between the two powerful global economies continues.
In early September this year a Chinese state news agency reported that some farm products, pork and soybeans, were no longer subject to additional tariff increases. The announcement helped to reduce tensions between the trading partners and make way for the recent soybean deal.
President Donald Trump announced that he will seek 25% tariffs on $200 billion of Chinese goods coming into the United States. The tariff was set to be 10%, but the White House is seeking to increase pressure on China to adhere to fairer trade policies.
On July 10 the administration said it would ask for 10% tariffs on thousands of Chinese products. Those imports include consumer goods such as furniture, dog food and baseball gloves to manufacturing materials like chemicals, steel and aluminum.
Before the tariffs can be imposed the proposal must wind through a period of public comment. The US Trade Commission has set the deadline for such comments to be filed by August 30 with hearings scheduled for August 20-23.
It is expected that a 25% tariff will be greeted with even less enthusiasm than the already beleaguered 10% tariff has been subjected too. It is expected that a 25% tariff will seriously escalate the trade war now already in progress.
Back in July China accused the US of bullying and threatened to hit back with tariffs of its own. Investors are afraid that a full-blown trade war could slow down global growth. Many key US business groups have criticized harshly Trump’s tariff policy.
Angered by US laws requiring that meat sold to consumers be labeled with the name of country to animal was born, grown and killed, Canada and Mexico won a formal complaint they had lodged with the World Trade Organization against the US requirements.
Mexico and Canada say these rules discriminate against imported meat, and are threatening to take steps to retaliate in what could become a full-blown trade war.
“Our governments will be seeking authorization from the WTO to take retaliatory measures against U.S. exports,” stated the Mexican and Canadian ministers for trade and agriculture.
Canada has already published a list of potential products to target for trade sanctions, such as wine, chocolate, ketchup and cereal. Mexico has not released a similar list, yet.
The beef and pork industries in Canada point to the fact that the US restrictions increase their expenses, reducing livestock exports. They say they have lost an estimated $1 billion a year in revenue as a result of this law.
Michael Conaway the Republican chairman of the House of Representatives Committee on Agriculture would like to see Congress do something fast.
“It is more important now than ever to act quickly to avoid a protracted trade war with our two largest trade partners,” Conaway said.
Republicans have a majority in the Congress, but they will most likely come up against a strong Democratic response to leave the labeling regulations in place. The top Democrat in the Committee on Agriculture, Collin Peterson, said he would oppose a change in the law. He added that he believes there are still steps that can be taken at the WTO before making any big changes.
The focus of the dispute is a law enacted in 2009 that requires retail outlets to label meat and pork in a way that gives consumers more information about the safety and the origin of the meat they purchase and eat.