The good news from last week’s announced partial trade deal with China is a possible doubling of spending on U.S. farm goods. But, the flip side of that coin is continuing uncertainty over details. Spending has gone from nearly $20 billion in 2017, to less than $10 billion so far, this year, to as much as $40 to $50 billion annually in two years, according to Treasury Secretary Steven Mnuchin. Bloomberg News reported some traders wanted to see more details before getting too excited, though one economist said the spending levels suggest China would buy a lot of U.S. meat, soybeans, corn and ethanol. American Farm Bureau trade adviser Dave Salmonsen says agriculture is cautiously optimistic.
But Salmonsen says a broad unwinding of tariffs will depend on a final deal that addresses core issues of intellectual property protection, forced technology transfers and Chinese industrial subsidies. Still, Salmonsen says, “a good start,” and for ag, a “win” possibly even ahead of a final deal.
The agreement marks the largest breakthrough in the costly trade war, and if finalized, could ease the need for another year of Market Facilitation Program payments for producers. The U.S. will suspend, as part of the interim deal, a tariff hike planned this week on $250 billion worth of Chinese goods and revisit a separate December boost on other goods.
Source: National Association of Farm Broadcasters