China’s Offer to U.S. Could be Valued at $1.2 Trillion, Impacting Ag

Wiesmeyer China
Trade War Truce 120318
A cease-fire between China and the U.S. is creating hope of a revival in agricultural exports to China, however tariffs on a number of ag good still remain in place. ( MGN )

A trade truce between the U.S. and China exploded the markets Sunday night , with double-digit gains in soybeans continuing into Monday morning trade.

The good news kept rolling in, as the President tweeted:

The cease-fire is over an escalating trade dispute between the U.S. and China. The trade tiff drove down the markets this fall, causing waning prices and turning into falling profit margins for farmers. Hope of a possible de-escalation of the tariff dispute is what drove markets to start of the week, igniting hopes of agricultural exports resuming into China. However, the reality is  retaliatory tariffs still remain in place.

“What I think we saw Saturday was really a bona fide truce, but no resolution,” said Farm Journal Washington Correspondent Jim Wiesemeyer. “But at least they're talking.”

Also Monday, Treasury Secretary Steve Mnunchin talked on CNBC, expressing optimism about the future of an overall trade agreement with China.

"This is the first time that we have a commitment from them that this will be a real agreement," Mnuchin told CNBC's Squawk Box. "I'm very hopeful we can turn this into a real agreement."

Wiesemeyer said Mnunchin’s comments on CNBC were a positive sign for the future of trade with China, including saying China has a current offer on the table valued at over $1.2 trillion.

“He said the U.S. has received commitments for concessions on several key areas and then he put a figure - he said China put on the table an offer of over $1.2 trillion in additional commitments, but the details of all that are going to have to be negotiated,” said Wiesemeyer.

That $1.2 trillion consists of more than just agricultural goods, but agriculture will be a part of the overarching deal. However, the lingering tariffs are still standing in the way. Any indication of removing those tariffs could be a sign of more trade to come.

“Everyone in the trade that I talked with over the weekend said really to get real excited about this they have to see an announcement from China that China has lifted the tariffs on those products, because then that would accelerate the odds that China could come into the market for perhaps major purchases of both of those products and perhaps others,” said Wiesemeyer.