An agreement between China and the United States to resolve the trade war “is coming along nicely,” said President Trump on Wednesday, although U.S. tariffs could remain in force for some time to assure that China lives up to the terms of the deal. The trade war has stunted U.S. food and ag exports and knocked China out of its usual spot as the leading importer of those products.
China has offered to buy large amounts of U.S. products, including agricultural goods, as part of an overall agreement to reduce its trade surplus with the United States. Two senior U.S. officials, Treasury Secretary Steve Mnuchin and trade representative Robert Lighthizer, are expected to join talks in China next week.
Before a trip to Ohio, Trump said, “The deal is coming along nicely. We have our top representatives going there this weekend to further the deal.” However, the president said tariffs would not be removed immediately.
“We’re talking about leaving them, and for a substantial period of time, because we have to make sure that if we do the deal with China, that China lives by the deal. Because they’ve had a lot of problems living by certain deals, and we have to make sure.”
China imposed retaliatory tariffs on U.S. products, and farm groups see the removal of U.S. tariffs as a step toward the restoration of normal trade. “This policy is madness,” said House Agriculture Committee member Cheri Bustos, an Illinois Democrat, in responding on social media to Trump’s statement. “I cannot stress how much this policy hurts our farmers. Ag producers cannot afford this trade war to continue for a ‘substantial period of time.’ ”
A promise by China to buy more U.S. ag exports might carry less wallop than expected, said economist David Widmar, who parsed the impact of a rumored $30-billion-a-year pledge. The USDA estimates that China will buy $9 billion worth of U.S. ag exports this year, a low starting point. It would take more than $10 billion in additional purchases to return to the roughly $21 billion that was sold annually to China before the trade war, he wrote at the Agricultural Economic Insights blog.
“In reality, a portion of any trade deal would be a redistribution of global trade” rather than a large surge in total U.S. exports, wrote Widmar. China would buy more U.S. goods with the result that U.S. exports to other countries would decline. “The value of all ag exports will be an important measure to monitor over time.”
U.S. farm exports are forecast at $141.5 billion this fiscal year, compared to $143.4 billion in fiscal 2018.