The Effects Of U.S. Tariffs

Dec 13, 2019  | 2 min  | Ep4517

The announcement of a trade deal with China had been bouncing around back-channels and President Trump’s Twitter account for several days. At the end of the week, a deal was announced though what’s in the fine print remains a mystery. The stock and commodity markets moved higher on the news.

Peter Tubbs has more. @PeterTubbs

Initial reports of the trade deal indicate that tariffs currently placed on Chinese imports will be rolled back, and that additional tariffs scheduled to take effect on Monday December 15th would be cancelled.

President Donald Trump: “This is a very large deal. The China deal covers tremendous manufacturing, farming, a lot of rules, regulations. A lot of things it covers, Phase 1 deal. But a lot of big things are covered. And I say affectionately, the farmers are going to have to go out and buy much larger tractors because it means a lot of business, a tremendous amount of business.”

There may be a “snap back” provision that would reapply tariffs if China does not complete promised purchases. The anticipated amount is sales of $50 billion in U.S. agriculture goods during 2020, double what was purchased from American farmers in 2017. Analysts estimate that American businesses and consumers have paid over $40 billion in tariffs on Chinese products since January 2018.

Harvest delays have encouraged the USDA to push the deadline for applications for Market Facilitation Program and Dairy Market Coverage. The new deadline is now December 20th.

The extension comes as dairy prices have declined 4 percent in the last two weeks, reversing an 11 percent rise over the last 90 days. Block cheddar prices have lost over 4 percent in the last two weeks after a 13 percent run-up since September.

Grain producers have endured a late and wet harvest, with many still in the fields. Retaliatory tariffs have reduced sales of corn and soybean to China by over 35 percent, lowering prices at the elevator below the cost of production for many producers. The value of agricultural exports to China in 2019 are down 11 percent compared to 2017.

A third round of MFP payments for the 2019 MFP cycle may be issued in January 2020. The USDA has paid out $18.5 Billion in MFP payments since 2018.

For Market to Market, I’m Peter Tubbs

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