Detail

United States of America

Oilseeds, oils and meals

Agricultural products, soybeans

01/11/2019

Trade

Comprehensive trade negotiations

From November 2019 to December 2019: Amid continued trade negotiations between the United States of America and China, in November, China issued additional import quotas for soybeans – comprising waivers of the retaliatory tariffs in place since July 2018 – to state-run and private companies. Eventually, in December, the two countries announced agreement on a ‘Phase one’ trade accord. The deal, which was signed on 15 January 2020 and took effect in mid-February 2020, included provisions for China to increase – over the course of two years – its imports of US agricultural goods by at least USD 32 billion compared with the level recorded in 2017. China also agreed to suspend planned tariff increases, relax its health standards regarding certain food imports, and expedite the approval of GM-crop imports. The USA committed to suspending an already planned escalation in import tariffs and reduce existing tariffs on certain Chinese goods – although the 25 percent surcharge on about half of all Chinese imports would remain in place. Furthermore, the two countries would consider further, phased reductions of the remaining tariffs, depending on the implementation of ‘Phase one’ and progress in future stages of the negotiations.

UNITED STATES / CHINA – trade dispute: Amid on-going trade talks, during the months of November and December 2019, China continued buying soybeans form the United States, as the China’s customs authorities issued fresh import quotas to state-run and private companies – including waivers of the retaliatory tariffs in place since July 2018 (see also MPPU Nov.’19). Eventually, on 13 December, the two countries announced that agreement on a “phase one” trade accord had been reached. The deal, which was signed on 15 January 2020 and will take effect in mid-February, includes provisions for China to increase – over the course of two years – its imports of US agricultural goods by at least USD 32 billion compared to the level recorded in 2017. Accordingly, China’s purchases of US agricultural goods (comprising both bulk commodities and consumer products) would need to reach at least USD 80 billion during 2020–2021. To meet the said purchasing targets, China would likely continue with its policy of granting temporary tariff waivers – assuming the existing tariffs on US goods remain in force. Furthermore, China agreed to suspend planned tariff increases, relax its health standards regarding certain food imports, and expedite the approval of GM-crop imports (see also below item on China). The United States, on the other hand, committed to suspend an already planned escalation in tariffs, while reducing existing import tariffs on certain Chinese goods – although the United States’ 25% surcharge on about half of all Chinese imports would remain in place. The bilateral agreement includes an enforcement mechanism to ensure that both sides honour their commitments. Reportedly, further phased reductions of the remaining tariffs might be considered, depending on the implementation of “phase one” and progress in future stages of the negotiations. While the new trade deal is expected to offer some respite to global markets, market observers debated how China ’s purchases of US goods would reach the agreed levels – recalling that, while soybeans used to account for about half of China’s US agricultural purchases (by value), China’s upcoming demand for US beans may be affected by both the recent outbreak of African swine fever and the availability of competitively priced Brazilian soy. Attention was also drawn to the point that the almost two year-long trade conflict has spurred China to invest in a number of alternative supply chains (see MPPU Dec.’18, Jan./Sep./Nov.’19 as well as below item on China). In addition, it remains to be seen how the bilateral trade deal will be received by the two countries’ respective trade partners.