Trump's China trade agreement

Trump's China trade agreement

Iowa leaders, farmers pleased but cautious about Trump's China trade agreement

Tyler Jett, David Jackson and Paul Davidson

Oct. 11, 2019

Iowa politicians, farmers and business leaders were cautiously optimistic about a Chinese trade agreement that President Donald Trump announced "in principle" Friday.

But some said they wanted more specifics from the White House, citing other times over the past year when expected relief from trade tensions failed to materialize.

"All of these things are positive," said Grant Kimberley, director of market development for the Iowa Soybean Association. "But there’s a whole lot of details that have to get worked out. Certainly, this is not a final deal. We have seen this before."

Trump said Friday during a White House visit by Chinese Vice Premier Liu He that he had reached an agreement on "phase one" of a trade deal. The United States will suspend a new round of tariffs on $250 billion worth of Chines goods, scheduled to begin Tuesday, and China, in turn, will suspend its planned retaliatory tariffs.

President Donald Trump shakes hands with Chinese Vice Premier Liu He in the Oval Office of the White House in Washington on Friday, Oct. 11, 2019.
President Donald Trump shakes hands with Chinese Vice Premier Liu He in the Oval Office of the White House in Washington on Friday, Oct. 11, 2019. (Photo: Andrew Harnik, AP)

More broadly, Trump said he is working toward a deal to protect U.S. companies' intellectual property rights in China. He said China also announced it will purchase $40 billion to $50 billion worth of U.S. agricultural products.

Chinese President Xi Jinping, in a letter to Trump on Friday, wrote that “I attach great importance to your concerns on agricultural products. Recently, Chinese companies involved have accelerated purchases of American agricultural products, including soybeans and pork.”

The details of the deal are not on paper. But Trump told reporters he hopes to nail down a more formal agreement with Xi at the Asia-Pacific Economic Cooperation leaders meeting in Chile in mid-November.

Iowa Republican U.S. Sen. Chuck Grassley said the announcement seemed to be a positive sign. But like others in Iowa, he wanted more information.

"Farmers in Iowa know far too well that the trade war has caused real financial pain in the heartland," he said in a statement. "But we need to know more about this deal and follow-through from China will be key."

Grassley’s fellow GOP senator from Iowa, Joni Ernst, also said Trump's announcement was good news, though she also wanted more specific information. Iowa Gov. Kim Reynolds said Congress needed to use this "momentum" to also ratify the pending United States-Mexico-Canada Agreement.

U.S. Rep. Abby Finkenauer said in a statement Friday evening that Trump should not celebrate solving a problem he created: “The President started this fire, and he should not be taking a victory lap over putting only part of that fire out. The markets we took decades to build have been lost to countries like Brazil, who continue to deforest as fast as they can. This trade war has gone on for far too long and its consequences will be felt for decades.”

Timing is crucial
Kimberley said Iowa soybean farmers need Chinese buyers during their coming harvest. A delay until the winter or spring — when China buys its soybeans from South America — could be too late for some farmers.

"If we miss this marketing window right now, from now until the winter, it becomes harder to make up for lost time," he said.

Kimberley said he is reserving judgment on the proposed agreement until he sees the specific volume of crops China agrees to buy.

Last year, China's purchases of U.S. soybeans dropped 74% to $3.1 billion. Pork sales fell 21% to $852 million. Iowa leads the nation in corn and pork production and is the second-largest soybean grower.

Iowa State University agricultural economist Chad Hart said he wants to know the timetable for China's promised agricultural purchases, specifically when it will buy the $40 billion to $50 billion in U.S. products Trump spoke of, and over what period.

President Donald Trump speaks with reporters on the South Lawn of the White House in Washington on Friday before departing for a campaign rally in Lake Charles, La.
President Donald Trump speaks with reporters on the South Lawn of the White House in Washington on Friday before departing for a campaign rally in Lake Charles, La. (Photo: Andrew Harnik, AP)

Before the trade dispute, Hart said, China bought $20 billion to $25 billion worth of U.S. agricultural products a year.

"I wouldn't break out the confetti yet," he said. But Hart added, "On face value, that sounds tremendous."  

Trump's announcement focused on the agricultural sector. But Iowa Association of Business and Industry President Mike Ralston said the trade war is also taking a toll on the state's manufacturers.

The Institute for Supply Management last week released figures from its manufacturing purchasing managers’ index that showed confidence at its weakest level since June 2009.

Likewise, the Iowa Business Council's survey of managers last month showed its first dip in confidence since the fourth quarter of 2016.  

"As agriculture prices and commodity prices continue to be depressed, that leads into manufacturing," said the council's executive director, Joe Murphy

Riley Walters, an analyst of Asian economic and technology policy at the Heritage Foundation in Washington, said, "The devil will be in the details, but it sounds like there’s at least some good progress being made."

Walters also noted that "there are still tariffs on over $400 billion worth of imports from China that Americans will continue to have to pay until a comprehensive deal is made."

Trump has previously said he would insist on a sweeping trade agreement that would settle long-time disputes over tariffs, currency rates, technology sharing, and intellectual property laws.

"We’re looking for a complete deal," Trump told reporters on Sept. 20. "I’m not looking for a partial deal."

China, however, had signaled an interest in something temporary as talks got underway Friday.

"A partial deal is a more feasible objective," said an English-language editorial in the state-run China Daily newspaper. "Not only would it be of tangible benefit by breaking the impasse, but it would also create badly needed breathing space for both sides to reflect on the bigger picture."

Tariffs have escalated
Since summer 2018, the U.S. has slapped tariffs, ranging from 10% to 25%, on about $360 billion in Chinese imports. The early tariffs largely focused on intermediate and industrial goods but the most recent have targeted consumer products such as clothing and electronics.

China has retaliated with duties on about $110 billion in U.S. shipments to that country, largely hitting agricultural products such as soybeans, fruit and vegetables, in an attempt to undercut support for Trump among his base in the farm belt. The levies also affected coffee, chemicals, cars, auto parts, whiskey, cigars and televisions.

With negotiations at an impasse in May, Trump significantly escalated the battle, boosting a 10% tariff on $250 billion in Chinese imports to 25% and announcing levies on the remaining $300 billion in products not already subject to duties.

Although Trump initially delayed the new tax on nearly $300 billion in mostly consumer products, he upped the ante in August following another fruitless round of trade talks. A 15% tariff on $112 billion of the imports took effect Sept. 1, up from a planned 10%, ensnaring items such as clothing and shoes. A 15% tariff on the remaining $160 billion — including toys, cell phones and laptops — is set to hit Dec. 15.

Retailers and manufacturers have absorbed much of the costs, but have started passing some along to American shoppers and warn that further price increases are likely on the way.

Also, a 25% tariff on the $250 billion in largely intermediate goods is set to rise to 30% Tuesday, barring a trade deal in the coming days.

Last month, both sides tamped down the crossfire ahead of the talks, with Trump delaying the duty on the $250 billion in products by two weeks and China excluding some items, such as animal feed and petroleum products, from its tariffs.

Staff writer Donnelle Eller contributed to this report.

Tyler Jett covers jobs and the economy for the Register. Contact him at 515-284-8215 and Follow him on Twitter @LetsJett.