On Friday [October 11] the Trump Administration said that a “very substantial phase one deal” had been reached with China regarding the ongoing trade dispute between the two countries, as China’s lead trade negotiator Chinese vice premier. Liu He, attended high level talks in the White House.
The potential agreement between the two countries included halting a planned increase of tariffs on about $250bn in goods from China – the tariff rate was set to increase from 25 to 30% this week. However, previous tariffs have not been trimmed and an increase set for December remains in place.
The deal could mean an increase in sales for US agricultural products to China reaching up to $40 or $50bn in the coming years, said Steven Mnuchin, secretary of the treasury. Discussions also took place on sanitary and phytosanitary related topics along with biotechnology linked issues, with the intention to make it easier for producers to ship products to China, said Robert Lighthizer, US trade representative during the event.
Both countries have been levying tit-for-tat tariffs since last year following an investigation completed by the office of the US Trade Representative (USTR) examining China’s policies, acts and practices regarding intellectual property, innovation and technology transfer.
Although considered a moment for “cautious optimism” there are still many questions to answer, said Jenny Hopkinson, senior government relations representative with the National Farmers Union (NFU) in the US.
“The only major thing we can take away from the announcement on Friday is that both parties are back at the table – they sat down … in a way we haven’t seen in some time,” she told us. “There were fits and starts last year, fits and starts this spring, so this is the first time in a long time where they sat down and said publicly, ‘We’ve reached some kind of détente.’
The American Soybean Association (ASA) hopes the news would bring a “de-escalation” in the trade war. It is seeking additional information about the potential impact of the deal on US soy producers. That sentiment was echoed by the American Feed Industry Association (AFIA), which told us it was “looking forward” to finding out more about the nuts and bolts of the deal.
Feed, agricultural industry considerations
Several questions remain regarding what will be included in the final write-up of the phase 1 deal as few details have been released, said Hopkinson.
“We know the October tariffs have been scrapped … we know there has been some conversation about technology transfer, intellectual property rules and financial services and to an extent currency manipulation,” she said.
The idea that US agricultural exports to China could potentially hit the $40 to $50bn mark was notable, she said. If realized, that would be a large escalation in exports as the high point previously was around $25bn in 2012, added Hopkinson.
“Before the trade war began, [the level of such exports] was floating around [the] $20bn [mark],” she said.
It will take several weeks to put “the deal on paper".
Regardless of the ins and outs of this deal, what US farmers and ranchers need is a stable and reliable market in China, stressed Hopkinson.
Going forward the NFU is looking for “systemic change,” she added.
Similarly, in the future, the AFIA said that it was interested in seeing several “underlying restriction and barriers” addressed that hamper feed or ingredient exports to China.
“The US animal food industry’s primary challenges stem from unfounded sanitary and phytosanitary sanitary and facility registration restrictions that cannot be addressed until the US and China come to a productive resolution to this tariff war,” said the AFIA.