China sets steps to take edge off trade tensions
U.S. farm goods on buy list
China said Friday that it is encouraging companies to buy U.S. farm products including soybeans and pork, and will exclude those commodities from additional tariffs, in the latest move to ease tensions before the two sides resume trade talks.
The Commerce Ministry’s announcement Friday follows a move earlier this week to exempt a range of American goods from 25% extra tariffs put in place last year, as the government seeks to soften the impact from the trade war. China didn’t specify the amount of purchases of pork and soybeans.
Equity markets have rebounded in recent days as both U.S. President Donald Trump and Chinese leader Xi Jinping sought to lower tensions that are clouding the outlook for the world’s biggest economies. Adding to the pressure on Beijing, China is facing pork shortages that are pushing up prices during a holiday period, prompting officials to ration sales in some areas. Still, major differences on the substantive issues that sparked the trade war remain.
“It is hoped the U.S. side can keep goodwill reciprocity with China through practical actions,” Global Times Editor-in-Chief Hu Xijin said in a tweet shortly before the move was announced.
“If the Chinese media is showing hope, then that is a good sign, but we both know that many good signs have come and gone these past few months,” Brad Doyle,
a Poinsett County farmer who sits on the board of the American Soybean Association, said Friday by email. “Trump’s team of trade negotiators assure us they are doing all they can to make a deal sooner rather than later.”
Doyle, who operates Eagle Seed Co. in Weiner, visited China last fall as part of his position with the American Soybean Association. “I can tell you the buyers want U.S. beans,” Doyle said. “They like our quality and our commitment in growing a sustainable crop on family farms.”
If a deal is reached soon, the timing is in favor of U.S. farmers, Doyle said.
“The South American soybean crop will not be ready until February, and our soybean crop is just now being harvested in some areas,” Doyle said. “So we have the supply advantage for now and this is a yearly cycle. The real tragedy is that China is investing in infrastructure in South America that would allow the farmers of Brazil primarily to lower their costs to deliver to the ports. Once they get a logistical advantage over the U.S., it will be hard for us to compete in the future for all crops they grow.”
Doyle also visited with a Chinese delegation of buyers
recently in Chicago during a foreign-trade meeting that involved 53 countries. “They have to feed their people, and as food gets short or more expensive, the urgency for an agreement is a must,” Doyle said. “Bottom line, we need a trade deal ASAP.”
China’s move was welcomed Friday by the Trump administration, which said it would help ease tensions ahead of the next round of talks.
“The really good part about this is there is some relaxation in the air with China exempting some tariffs. We’ve returned the favor, and the negotiations are moving along nicely,” Larry Kudlow, director of the National Economic Council, said Friday.
The U.S. Department of Agriculture said Friday that private exporters were reporting 204,000 metric tons of new soybean sales to China — the first major purchases in months after Chinese state-supported industries stopped buying U.S. soybeans and other agricultural products.
Trump administration officials have discussed offering a limited trade agreement to China that would delay and even roll back some U.S. tariffs for the first time in exchange for Chinese commitments on intellectual property and agricultural purchases. Working-level teams from both countries
are set to meet next week.
“The ice is thawing,” said Chua Hak Bin, an economist at Maybank Kim Eng Research in Singapore. “China’s reciprocity to Trump’s goodwill gesture will set the stage for more cooperative trade talks.”
The easing of agricultural tariffs also could help China with its internal problems. Food inflation has been rising as Chinese authorities battle an epidemic of swine fever, which has forced China to cull more than 1 million pigs.
China had halted U.S. farm-product imports in August after trade-deal negotiations deteriorated. Before that, Beijing had given the go-ahead for five companies to buy up to 3 million tons of U.S. soybeans free of retaliatory import tariffs, people familiar with the situation had said.
The soybean move capped three days of unexpected improvement in a U.S.-China relationship that had run aground. On Wednesday, China eased tariffs on 16 U.S. products, including alfalfa, pharmaceuticals, lubricant oil, fish meal and pesticides. Trump responded by delaying a planned Oct. 1 tariff increase on $250 billion of Chinese goods by two weeks, to avoid conflicting with Beijing’s plans to celebrate the 70th anniversary of the Chinese revolution.
The recent flurry of reciprocal moves suggested that the two sides might try to escape their deepening conflict by agreeing first on a partial deal while continuing talks aimed at a comprehensive settlement.
James Green, who until last year managed trade issues for the U.S. Embassy in Beijing, said Chinese officials believe a partial accord would boost Xi’s image domestically for managing the difficult U.S. relationship and make China look like a responsible actor on the global stage.
“I think the Chinese side wisely decided that some partial agreement would serve their interests,” he said.
While some analysts have suggested that Trump may feel pressure to seek a partial deal after complaints that the trade war is hurting the economy, that is not how China hawks in the White House see it.
“An interim deal would be opposed by some in the Trump administration who would see it as giving up leverage, but it would be welcomed by the business community,” said John Frisbie, managing director of the consultancy Hills & Co. “A full deal might be too big a task right now, given the level of distrust between the two sides.”
Recent economic data, including Friday’s retail sales figures, have been strong, and the stock market has recovered after a late-2018 plunge. The administration feels it is close to securing congressional approval of the U.S.-Mexico-Canada trade deal and is closing in on pacts with Japan and India.
U.S. and Chinese negotiators by early May had agreed on 90% of a trade deal that stretched beyond 150 pages, according to Treasury Secretary Steven Mnuchin. But Xi balked at enshrining key provisions in the country’s legal code, leading to the collapse of the talks, according to U.S. officials.
Since then, relations have deteriorated as Trump lashed out with additional tariffs and barred Huawei Technologies, one of China’s most prominent global companies, from purchasing American computer chips, triggering Chinese retaliation.
The Chinese and American leaders agreed in Osaka, Japan, to revive the talks at the end of June. But despite a trip to Shanghai by Mnuchin and Robert Lighthizer, the chief U.S. trade negotiator, the two sides remain far apart.
Frustrated by the lack of progress, Trump last month announced further tariff increases that would apply by mid-December to nearly every product the United States imports from China.
Working-level discussions between U.S. and Chinese officials are scheduled for next week in Washington. Assuming they go well, Chinese Vice Premier Liu He is scheduled to meet with Lighthizer and Mnuchin in Washington during the first half of October.