US, China Appear Set to Impose Tariffs Friday

Source: By Katie Dehlinger, Progressive Farmer • Posted: Saturday, July 7, 2018

The Trump administration is set to impose $34 billion of tariffs on Chinese goods at 12:01 a.m. EDT on Friday, and Beijing is expected to retaliate with increased tariffs on a lengthy list of agricultural goods, including soybeans. (DTN file photo by Jim Patrico)

The Trump administration is set to impose $34 billion of tariffs on Chinese goods at 12:01 a.m. EDT on Friday, and Beijing is expected to retaliate with increased tariffs on a lengthy list of agricultural goods, including soybeans. (DTN file photo by Jim Patrico)

MOUNT JULIET, Tenn. (DTN) — As the smoke from barbeques and fireworks clears, the tariff picture is coming into focus, and it appears to be full steam ahead.

Mexico is slated to join Canada on Thursday in placing new tariffs, and increasing others, on a number of U.S. agricultural goods in retaliation for U.S. duties on steel and aluminum. And with no high-level trade discussions planned between the U.S. and China, the likelihood of a last-minute ceasefire seems unlikely.

The Trump administration is set to impose $34 billion of tariffs on Chinese goods at 12:01 a.m. EDT on Friday, and Beijing is expected to retaliate with increased tariffs on a lengthy list of agricultural goods, including soybeans, pork, poultry, dairy products, grains, fruits, nuts, vegetables and more.

“President Donald Trump’s threatening another $200 billion of tariffs if China does respond that way, with the bigger picture being: Where is this headed?” asked DTN Analyst Todd Hultman. “And what’s it going to mean? Will it have long-term ramifications for soybean demand from the world’s largest soybean buyer? To me, that is the big, big question, and may not be answered tomorrow. But as things get more hostile, it continues to scare buyers away from the market and is keeping soybean prices at their lowest November prices in over two years.”

November soybean futures prices dropped to $8.61 at midday on Thursday. Wednesday’s DTN National Soybean Index dropped to $7.87, the lowest level since December 2008.

Hultman said the immediate impact has been on demand.

“There’s some cash, physical demand, but as far as investors helping out prices, forget it. Commercials did turn long in last Friday’s CFTC report for the first time since February. That’s a good sign of recognizing that soybeans are at cheap values, but I think we’re going to need to see more confidence from the investment side to help prices come out of this hole. If we didn’t have this trade issue going on, I would say that’s a great sign of support and we’re probably near a market low, but in this political environment, I don’t think you can step out and say that,” he added.

Purdue University agricultural economist Brent Gloy said the administration’s political choices are hard to predict, piling additional uncertainty on the market.

“It’s not just China. We’re picking trade fights with everybody we can,” Gloy told DTN. “For most Americans it, honestly, doesn’t make that much difference. But for those of us in an export-dependent sector, it’s a big problem.”

He also cautions that tariffs will have an impact over the long term, even if our trade disputes resolve relatively quickly. “There are serious costs on the trading system that are imposed by the tariffs. It’s going to incentivize production in other places, Brazil particularly, at the detriment of us. The more you do that, it’s just not ideal.”

MEXICO TARIFFS

Mexico has already raised some tariffs in response to U.S. steel and aluminum tariffs, and is poised to raise or place new tariffs on 16 agricultural products, including cheeses, pork hams and shoulders, apples, sausages, frozen potatoes, frozen cranberries, orange juice and whiskey on Thursday.

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