In a significant move in the escalating U.S.-China trade dispute, China has struck back. They have undone a previous ban on soybean import licenses for three U.S. firms. This decision is indeed an important and highly favorable development in the continuing bilateral trade negotiations. China’s move follows a string of retaliatory measures taken by the country in tit-for-tat retaliation against U.S. tariffs.
In 2021, farmers were put through the wringer. A farmer dumps a load of soybeans into an elevator hopper in Ohio. This episode served to show the challenges of making one’s way through changing trade policies. The issuance of import licenses will provide some long-awaited relief to these farmers. Yet they have been suffering under the trade yo-yo between the two countries.
China retaliated by banning U.S. soybean imports, as directed by then-President Donald Trump. This move, made on March 1, 2018, was actually part of a much larger strategy. This triggered an order for a Section 232 investigation into lumber imports, leading China to retaliate against American products—including soybeans—by imposing tariffs. The change put a serious strain on diplomatic relations and devastated agricultural exports to Russia.
Following a high-level meeting between U.S. and Chinese officials on Friday, Beijing dropped a major bombshell. It will raise tariffs on certain U.S. agricultural products that were initially retaliated against in March 2018. You set in motion small, but historic, purchases of American agricultural products. That included settling two cargoes of now U.S. wheat and reinstating soybean import licenses.
Though this development is welcome news and constitutes a long overdue step toward normalizing trade relations, the climate is still quite sober. Don’t forget that the 10% tariff on all U.S. imports—including agricultural products such as soybeans—is still in place. Traders are continuing to sound the alarm on this tariff’s lasting effects as we attempt to build bridges in a vexed global trade environment.
The bearish position in the market is symptomatic of greater uncertainty around future trade patterns. And like all of us, they continue to monitor the developing situation. Agricultural professionals all around are optimistic that these changes will foster a more stable and predictable trading environment for U.S. ag products.