China to Exempt U.S. Soybeans, Pork From Punitive Tariffs
Date: Friday, September 13, 2019
Source: The Wall Street Journal
Measure follows President Trump’s two-week postponement of increased tariffs on some Chinese goods
China will exempt purchases of U.S. soybeans, pork and other agricultural products from punitive tariffs, in a move that appears aimed at addressing one of President Trump’s most pressing demands during the protracted trade war.
China’s official Xinhua News Agency said the government would support purchases of U.S. agricultural products by Chinese companies and waive the tariffs Beijing has imposed as trade tensions have intensified. The report didn’t specify the amount of products affected by the measure, which was attributed to the country’s Commerce Ministry and its main economic planning agency, the National Development and Reform Commission.
The U.S. and China are seeking ways to break a deadlock in the continuing trade war before the next round of high-level negotiations, scheduled to take place in Washington in early October.
Both sides have made goodwill gestures in recent days. On Wednesday, Mr. Trump delayed a new round of tariff increases on $250 billion of imports from China that would have taken effect Oct. 1, the 70th anniversary of Communist Chinese rule—an apparent concession that the state-media report cited in justifying the lifting of tariffs on U.S. agricultural goods.
“The really good part about this is that there’s some relaxation in the air with China exempting some tariffs,” said Lawrence Kudlow, Mr. Trump’s top economic advisor.
“We returned the favor. And the negotiations are moving along nicely.”
Farm groups cheered the new measures, and prices of soybean and other agricultural commodities rallied on the news, though many details remain unknown and previous similar agreements have sputtered out.
“The prospect of reductions in tariffs on soy and pork is energizing news for U.S. farmers,” said David Salmonsen, a senior director at the American Farm Bureau Federation. “And while we don’t yet know if this meant just to stop new increases or reduce tariffs already in place, this is a good sign for the future. Farmers and ranchers need the Chinese market.”
Soybean prices have risen 4% since Wednesday, when China first signaled steps toward resuming agricultural purchases. But even after this week’s rally, soybean prices remain depressed, down about 17% compared with prices last spring, before the trade war had started.
Agricultural exporters still have a long road ahead to regain the market that has been lost in China. In the 12 months through July, agriculture and foodstuff exports to China dropped by nearly $10 billion, compared with the same period a year earlier—a plunge of over 50%.
Oil seeds including soybeans accounted for more than $7 billion of that drop, with those exports down by 65% as China ratcheted up tariffs and slammed the brakes on purchases from its state-controlled importers.
Farmers have seen apparent detente with China lead to tentative steps to resume purchases, only for those to fall flat the next time trade talks hit a snag.
“U.S. commodity exporters are eager to get back into China, but unless the U.S. can make a broader U.S.-China agreement stick everyone knows that market access will only be temporary,” said Jessica Wasserman, a partner in the international trade practice at Greenspoon Marder LLP.
Beijing is looking separately to focus the scope of its negotiations with the U.S. only on trade matters and set aside national-security issues to address on a different track, The Wall Street Journal reported Thursday.
China’s latest move could get a positive reception from Mr. Trump, who said after a Group of 20 leaders’ meeting in June that President Xi Jinping had agreed to make purchases of large amounts of U.S. farm goods.
China, however, didn’t mention such a commitment after the meeting, and the Journal reported that Mr. Xi had made no such promise.
Mr. Trump has since complained about what he regards as China’s backsliding on its commitment to buy U.S. farm products.
A resumption of purchases is likely to be one precondition for the U.S. and China making progress at talks in October. Messrs. Xi and Trump are both expected to attend the Asia-Pacific Economic Cooperation summit in Santiago, Chile, in November. The city could host a bilateral follow-up meeting between the two leaders who must ultimately sign off on any deal.
Factors beyond the trade war might be behind China’s lifting of tariffs on items such as pork, a staple of the national diet. A yearlong outbreak of deadly African swine fever has ravaged the country’s hog population, and Beijing has struggled in recent weeks to increase pork supply, from pushing farming incentives to rationing and even opening its emergency pork reserves.
Even so, the two countries’ recent conciliatory gestures have been relatively limited, underscoring the low level of trust between them.
Analysts have warned, too, that the goodwill could prove fleeting, particularly if the next round of trade talks in Washington don’t go well and the U.S. proceeds with the postponed tariff increases, now set for Oct. 15.
“It’s good news, then a change, then good news again,” said Ye Xingqing, a rural economics researcher at the State Council’s Development Research Center think tank, of the trade relationship. “It’s very hard to predict.”
Jim Huang, chief executive of China-America Commodity Data Analytics Inc. in Wuhan, China, said Beijing’s latest measure means Chinese companies might need to go through a process of applying for the exemptions. He calculated that, after two rounds of retaliatory trade measures, China is imposing 30% tariffs on U.S. pork and soybeans.
“The world is looking forward to progress on the China-U.S. consultations,” Liu He, China’s chief trade negotiator, was quoted as saying in a Xinhua report Thursday. Mr. Liu said working-level officials from both countries would meet next week to exchange views on the bilateral trade balance, market access and investor protections, according to the report.