Extreme Focus on U.S./China Trade Developments Continues

Posted on 05/12/2019 10:35 AM

Reaction to another possible U.S. ag aid program from Trump administration

Weekend tweets from President Donald Trump about China again surfaced and they are not China friendly. Meanwhile, the Trump team on Monday will release details of its plans for tariffs on another $300 billion of imports from China, which still has not said how it will react to Friday's tariff rate hikes on its products, but word could come soon. USDA Secretary Sonny Perdue was interviewed in Japan by Bloomberg and said retaliation by Beijing would prompt the U.S. to boost support to its farmers. As for Trump's Friday tweets about buying $15 billion of ag commodities and giving them to poor, needy nations, national farm and commodity and biofuel groups have reacted, as well as comments from lawmakers and former USDA Secretary Tom Vilsack. Pro Farmer's Policy Updates on Monday will include any further developments on U.S./China trade policy.


U.S./China trade policy update:

  • Trump's weekend tweets taunt China on trade talks. President Donald Trump said it would be wise for China to “act now” to finish a trade deal with the U.S., predicting that “far worse” terms would be ahead for them after what he predicted would be his certain re-election in 2020. “I think that China felt they were beaten so badly in the recent negotiation that they may as well wait around for the next election,” Trump said Saturday in a pair of evening tweets. “The only problem is that they know I am going to win.” In another earlier tweet, Trump wrote: “Such an easy way to avoid Tariffs? Make or produce your goods and products in the good old USA. It’s very simple!”
  • Link to a Pro Farmer special report on the U.S./China developments released Saturday. Link to our initial report on Trump's Friday tweets about another possible aid program for the U.S. ag sector.
  • The Trump administration sometime Monday will release details of its plans for tariffs on an extra $300 billion of imports from China, U.S. Trade Representative Bob Lighthizer said.
  • Tariff hike impacts. Daniel Ikenson, a trade policy expert at the libertarian Cato Institute, which has opposed Trump’s tariffs, calculated that an across-the-board 25% levy on Chinese imports may amount to a tax on American consumers of as much as $135 billion, based on the $543 billion in goods imported in 2018 as a baseline. “That’s a cost of about $400 for every person in the United States,” he wrote in a blog. “That’s a lot.”
  • Kudlow on tariffs: Both countries will suffer. National Economic Council Director Larry Kudlow on Fox News Sunday was asked, "[The Chinese] may suffer consequences, but it's U.S. businesses and U.S. consumers who pay, correct?" Kudlow: "Yes, to some extent. I don't disagree with that. Again, both sides ... will suffer on this." The blow to U.S. gross domestic product will be minuscule, he said, as the economy is “in terrific shape. This is a risk we should and can take without damaging our economy in any appreciable way.” The risk to prices is worth it, Kudlow said, calling past trade relations with the communist nation "unfair, nonreciprocal, unbalanced, in many cases unlawful." Kudlow also said, “Let me repeat the strong possibility that the two presidents (Trump and Xi Jinping) will meet in Japan at the G20 meeting” in June. Kudlow said the chances of such a meeting “were pretty good,” but he said there are “no concrete, definite plans” for when U.S. and Chinese negotiators will meet again.
  • Kudlow said, “maybe the toughest burden is on farmers” and that additional help will be sought. “I think we had an authorization of $12 billion,” Kudlow said, referring to the dollar amount the Trump administration has already pledged in aid to farmers and the ag sector. “We will do it again if we have to … We will do that,” he said on Fox News Sunday.
  • Kudlow expects China to retaliate against the U.S. Beijing threatened to take “countermeasures” against the U.S., but so far it has not done so. Kudlow said China had backtracked on its commitments, which precipitated Trump’s decision to increase tariffs. He pointed to intellectual property theft and forced technology transfers as sticking points. “Things seemed to be taking too long, and we can’t accept any backtracking,” Kudlow said. “We don’t think the Chinese have come far enough, we will wait and see.”
  • USDA Sec. Sonny Perdue wants China to be a customer of American farm products, even after Washington hiked tariffs on more than $200 billion in Chinese goods Friday, and said retaliation by Beijing would prompt the U.S. to boost support to its farmers — while China said in a statement it will be forced to retaliate, it has not yet provided details. “Our biggest goal will be for China not to retaliate and stay at the table to negotiate a good deal,” Perdue told Bloomberg News on Sunday, adding the U.S. will respond if China retaliates. Perdue was in Niigata city in northern Japan to attend the Group of 20 farm ministers’ meeting. Japan was the host of the gathering. Perdue's latest comments on additional aid is contrary to his prior repeating statements there would be no additional aid for the 2019 crop season.
  • Perdue said he is working carefully on a plan and will submit it to the president within “a few days to a couple of weeks." Trump in tweets last Friday promised to protect farmers, including a plan to buy surplus agricultural products with taxpayer dollars and send the goods abroad as humanitarian assistance.
  • Perdue said implementation of the program will take time, as the U.S. has a large stockpile of grain and oilseed. “I cannot say for sure right now when purchases of those kinds of products will take place,” Perdue said. “We have to look at the seasonality of all the crops across the spectrum and agree on which are hurt and damaged by China’s decisions.”
  • Some ag sector naysaying about potential structure of more aid. Roger Johnson, president of the National Farmers Union, a group many say tilts toward Democrats, expressed concern with President Trump’s tweet about buying up farm products. “That’s a very different thing than assistance to farmers,” Johnson said. He said dumping supplies in other countries could further depress prices and also jeopardize those fragile largely agrarian economies. Joe Glauber, former chief economist at USDA and a frequent critic of Trump administration policy, said corn and soybeans are typically animal feed and not food aid, which usually consists of wheat and rice. Such a move also would also invite further trade disputes, he said, since they would likely be judged export subsidies prohibited by the WTO, if they weren’t seen as humanitarian aid, Glauber said. “You can’t just dump grain at concessional prices. That would constitute an export subsidy. That is something the WTO members agreed not to do,” Glauber said.
  • Trump focus on China gets some positive feedback across the political spectrum. Rep. Tom Cole (R-Okla.) said he fully supported the president’s stance even though the trade war was hurting businesses and farmers in his district. "This is a line in the sand that needed to be drawn a long time ago, I’m proud he’s doing it and he deserves our support," said Cole, who predicted most Republicans would back the president. Rep. Brad Sherman (D-Calif.) was among the Democrats who said he’s pleasantly surprised by Trump staying tough on China. He backed the idea of substantial tariffs and spending it on farm and other products impacted by Chinese retaliation. "Of all the Trump policies, if I had to cheer one, this would be it," he said. "President after president has done nothing."
  • The American Farm Bureau Federation said it was too soon to throw its support behind the potential aid program.
  • Reaction from some U.S. commodity groups: farmers are 'extremely concerned'. The National Corn Growers Association, the National Association of Wheat Growers and the American Soybean Association released a joint statement Friday saying that “farmers across the country are extremely concerned by the actions taken today (Friday) by President Trump and his administration.”
  • The National Pork Producers Council (NPPC) supports a possible food aid program. “It is fair and right that the U.S. government purchase significant quantities of pork over the next 18 months to ship as food aid to help ease the financial burden placed on producers,” said David Herring, president of the NPPC.
  • The biofuels sector weighed in on the latest developments. “It’s just one hit after the next for our industry and the rural economy. We will continue pressing the administration to reopen these critical markets,” said Chris Bliley, vice president of regulatory affairs at Growth Energy, an ethanol industry trade group. Geoff Cooper, president of the Renewable Fuels Association, expressed similar concerns. “News of the worsening trade conflict with China is yet another punch in the gut to the U.S. ethanol industry and our partners in agriculture,” Cooper said. “The escalating trade war just exacerbates the turmoil in our markets and pushes rural America closer to the precipice.”
  • Former USDA Secretary Tom Vilsack also noted his concerns about Trump's China policy. Vilsack, according to CNBC and Reuters, said there are costs beyond just purchasing the agricultural commodities such as soybeans, wheat, corn and dairy from U.S. farmers as well as additional risks. “You’re going to have to store it, and the government is going to incur expenses of storage,” he said. “There is always the possibility of spoilage, depending on what commodities we’re talking about.” Vilsack said he’s concerned that Trump’s plan to expand tariffs on Chinese imports so that they include another around $300 billion in goods could make the trade conflict last longer and even more painful for American farmers. He also suggested that any benefits of a deal down the road may not be worth it in the end. “You’re going to get to the point that whatever deal is cut may not have the benefits over the long haul that overcome or pay for the pain that you’re suffering now,” he said. Vilsack believes the Trump administration made a mistake by taking on China alone with the trade dispute. He also said by ditching the Trans-Pacific Partnership (TPP) his third day in office left U.S. agriculture at a competitive disadvantage compared with other countries that joined the free trade agreement. “The biggest problem with all of this is that the U.S. went into this discussion with China alone,” he said. “Had they spent some time and put together a coalition of nations that are being similarly mistreated and unfairly treated by China, then it would have been much more difficult for China to put a target on American agriculture. But that’s precisely what’s happened here.”


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