No Deal: China Suspends Agricultural Purchases from America

No Deal: China Suspends Agricultural Purchases from America

China has further distanced itself from America by suspending the purchase of US agricultural products earlier this month, as the trade war continues between the world’s two biggest economies.

The Chinese government has advised state-owned enterprises to cease purchasing agricultural products from US suppliers and many private companies are seeking alternatives, amid concern about future trade relations. The Chinese Commerce Ministry has confirmed that importers have suspended purchasing from American partners and hasn’t ruled out taxing goods traded after August 3rd

Over the weekend, US President Donald Trump announced a further hike in tariffs on billions of dollars of Chinese imports, in retaliation for China’s announcement that it will impose new duties and taxes on $75 billion of US goods from September.

Frustrated by China’s move, as well as the decision by US Federal Chairman Jay Powell to maintain current interest rates, Mr Trump threatened to increase tariffs from 25% to 30% on $250 billion of Chinese imports, and a 10% to 15% increase on tariffs across $300 billion of goods.

Mr Trump also confirmed that he plans to order US companies to move Chinese-based operations back to The States, although it is unclear how this could be enforced legally.

Recent news reports suggest that the line of communication between China and the US has been restored with Mr Trump confirming that China had requested a new round of trade talks.

“We’re going to start very shortly to negotiate… but I think we’re going to make a deal,” he said.

Despite the agreement to resume trade negotiations, foreign ministary spokesman Geng Shuang warned that China will not be bullied by the US.

“We strongly urge the US not to miscalculate the situation and immediately cease its wrong actions. If the US implements its plan of raising tariffs, China will definitely continue to take measures and safeguard its own legitimate rights. China does not accept any threats or intimidation,” he said.

Local Opportunities

Australian agriculture could see a significant boost to revenue and jobs as a result of the US-China trade war.

According to a recent report by Ernst and Young, the local industry could receive an additional $1billion in one-off revenue, with up to 4900 new jobs created in the long term.

With America out of the picture for the foreseeable future, Australian agriculture is now in a position to capitalise on existing relationships with China. China imported $12 billion of Australian agricultural products in 2017-2018, largely comprised of beef, wine and wheat.

According to Ernst & Young chief economist Jo Masters, wheat is one commodity that could benefit from changing trade dynamics, potentially providing drought-stricken farmers with a well-needed boost to revenue.

“We compete with the United States when it comes to agriculture. At least in the early stages there are opportunities for Australian farmers,” she said.

A short-term trade dispute could have longer lasting benefits for Australian suppliers as they develop relationships with Chinese importers and showcase the quality of Australian-grown produce to consumers.

After Japan banned US beef imports in 2003 due to an outbreak of mad cow disease, Australian exports blossomed by more than 40%.

Sources: Sydney Morning HeraldBBC,BBCPolitico, Bloomberg
Image: “Donald Trump Sr. at #FITN in Nashua, NH” by Michael Vadon is licensed under CC BY-SA 2.0