Trade agreement hinges on Chinese agriculture purchases

USTR clarifies Section 301 duties

Agriculture purchases are at the current heart of tensions between the US and China. The United States agreed to a preliminary “phase one” negotiation expecting China to increase purchases of US crops to the tune of $50 billion but the purchases haven’t manifested entirely. The negotiators in China want a rollback of the US tariffs to happen before increasing the agriculture imports. President Donald Trump has advised there will not be a rollback of tariffs but a significant increase in them if China doesn’t move forward.

China has made some consolations regarding the negotiations; recently unbanning US poultry imports and sourcing purchases from approved US plants. The proteins exported are crucial to China as one third of their hog farms were wiped out earlier this year when African swine fever swept the country. The Chinese diet depends heavily on proteins and almost immediately their imports of poultry and beef began climbing rapidly. China has also purchased some US soybeans, a big issue in the negotiations. Unfortunately, due to the trade stagnation, the importers of the soybeans are waiting up to 28 days to recover their freight after paying 30% up front for the expected duties.

As December 15th looms ever closer, all eyes are fixed on the trade negotiations between the US and China. A year of back and forth talks, tariff increases, postponements, and stalemates has lingered on as predictions fall apart, information changes by the day and the solutions seems just out of reach. When an agreement to prepare a “phase one” deal was announced, both sides were expected to come to the table in Chile at the APEC Conference, later cancelled due to civil unrest in the host nation. Since the cancellation no updated location has been selected and as the two sides continue to come to just the first part of the agreement.

Recently, the US Treasury Secretary intimated that the US may be willing to accept a $40-50 billion agriculture purchase over two years if it would expedite the agreement. We at Edward J. Zarach & Associates understand this is a paramount topic for the New Year and we’ll keep updating the situation as more information becomes available.