December 4, 2018

Buying of US soybeans may not happen soon despite US-China G-20 breakthrough
 

The recent G-20 meeting in Argentina saw both China and the US agreeing not to impose more tariffs on each other in an ongoing trade dispute - with the former expected to buy a "very substantial", though unspecified, amount of agricultural, energy, industrial and other products, according to the US. 
 
The news was welcomed by the American Soybean Association (ASA) following "months of downturned prices and halted shipments", and could lead to a "longer-term agreement" that is "extremely positive for the [US] soy industry," said John Heisdorffer, president of ASA. 
 
The US and China will now work towards an agreement on trade issues within a 90-day timeframe - failure of reaching a deal, however, could see the US raise 10% tariffs already imposed on Chinese goods to 25%.  
 
And while the latest development had pushed up soybean prices after the announcement, agricultural economists warned that China may not start buying US agricultural goods immediately despite the White House's assurance. 
 
"In that sense it's good, but it doesn't do anything about the tariffs that are already in place, and that's the concern," said Wally Tyner, a Purdue University agricultural economists, who pointed out that current tariffs could hinder Chinese buying for now.

Furthermore, China may not even buy a "large amount" of US products, Tyner added. Although other countries are making up for lost demand by buying US soybeans, buying and exporting of those products would not be at the levels enjoyed before the US-China trade war.

Tyner also estimated that overall loss in demand would amount to around 29%, and suggested that a "long-term settlement" between the US and China - that could abrogate all tariffs - is required.