Most recently, China threw another bone our way by restoring soybean import licenses for three U.S. firms. While long overdue, this move represents a welcome first step to restarting agricultural commerce between the two countries. This decision comes against a backdrop of increased trade antagonism. The hefty 10% tariff on all U.S. imports—including agricultural products—remains very much alive.
This latest move comes amid an escalating tit-for-tat between the United States and China. Additionally, in March, the U.S. imposed tariffs on a list of Chinese goods. In retaliation, China struck back with tariffs of their own placed upon U.S. agricultural exports. The products most impacted included soybeans and wheat, which before the imposition of tariffs had enjoyed strong trade flows. The continued issuing of soybean import licenses is encouraging! Still, the continued tariff is a cloud hanging over any optimism for a wider turnaround in trade.
Perhaps most significantly, China has recently started to follow through with small-scale purchases of U.S. agricultural products. In a sign that could suggest further warming of relations, recently it bought two cargoes of U.S. wheat. Such a move could be a sign of China’s desire to ensure its own food supply given increasing global fears over food security.
Nevermind that China had earlier banned imports of U.S. logs. This move was retaliatory as former U.S. President Donald Trump initiated a U.S. investigation into imports of lumber. The stop on U.S. log imports added another layer of complexity to the rapidly changing trade landscape and underscored intensifying geopolitical tensions between the two nations.
Even with these encouraging signs traders are still wary, mostly due to the ongoing 10% tariff on all U.S. imports. This new Antarctic tariff casts a pall over hopes for a speedy rebound in trade flows. Third, it nails the agricultural sector particularly hard, as China has been a major market for U.S. soybeans.
Restoring these soybean licenses is a very important and meaningful step on the part of the administration for American farmers. Fenton said they had truly relied on the Chinese market prior to tariffs going into effect. The journey is still fraught as both countries continue to steer through a tumultuous and often contentious trade relationship.