News of Chinese retaliatory tariffs spread like wildfire on Monday. The tariffs ranging from 10% to 25% on $60 billion worth of American goods will go into effect June 1, unless an agreement is reached before then.
“China has hit back announcing that it would, boost tariffs on $60 billion worth of U.S. goods; that follows the Trump administration’s push ahead with new duties on Chinese goods,” Pro Farmer’s Jim Wiesemeyer told AgriTalk host Chip Flory. “I think this leaves breathing room, because June 1 gives both sides time. Now we can breathe and let's hope the tentatively scheduled next trip to Beijing is well before June 1.”
Need a quick recap of how we arrived at this crossroads? Read Farmer Patience Dwindles As China Trade Talks March On, Dancing with Dragons: 6 Need-to-Know Facts on China Trade and China Announces Tariff Retaliation to Take Effect on June 1.
Iowa Senator Chuck Grassley told Flory that a week ago he would have said the deal would have been wrapped up this past weekend, with President Xi and President Trump signing an agreement toward the end of May. While he understands negotiating with China is a challenge, he says an agreement is needed soon.
“I sympathize with the president’s waning patience with the Chinese,” he said. “Enough is enough, it's time to strike a strong enforceable deal so farmers, businesses, consumers can get some certainty.”
Grassley wants Chinese negotiators to swiftly bring these talks to a close before June 1 to effectively avoid the retaliatory tariffs.
“If they went into effect, it ultimately hurts Americans in the U.S. economy,” he said. “We can help both the second largest economy in the world, China's, and the largest economy in the world, America’s, by getting an agreement, and I hope that we can do that.”
While nobody can say for certain when the deal will be wrapped up, Wiesemeyer said, signals point to traction.
“There were some kernels of compromise in the various comments over the weekend where Trump even suggested that he could possibly lift all the tariffs, if some of this backtracking would be rethought on China's part,” he said. “I do not discount that lightly. That would get both China's leader, Xi Jinping, and President Trump a win-win and boy, that's what both need in this environment right now.”
Global Markets Diversify
A side effect of the trade turmoil between the U.S. and China is the beginning of manufacturing diversification around the world.
“Much like U.S. agriculture is concerned about the long-term negative impacts that China has already taken efforts to diversify their imports of foreign products,” Wiesemeyer said. “Now that is major because it will hurt both the U.S. and China and I don't see that stopping even if we were to get an agreement.”
What’s more, negotiators walking away from the table, could have severe impacts on the Chinese and American economies.
“The downside is this would lead to a downturn in economic growth, if not a world recession, and nobody needs that,” Wiesemeyer said.
On the bright side, a deal would be a big win for all parties involved and would mean decades of positive economic growth.
“It's definitely not only a positive, it's a significant positive,” Wiesemeyer said. “You’ve got to have a win-win. We know what the win is for China, they will be want all tariffs lifted immediately. And for the first time over the weekend, I saw the U.S. signal that they could possibly do that, provided China gives them the top priorities that the U.S. wants. I'll let Trump and U.S. trade Rep. Bob Lighthizer detail those, but at least we know that a win-win is possible.”