“Farmers are struggling to feed their families amid bad market conditions and Trump’s policy. As 2020 will be the election year and agricultural producers are the main electorate, Trump needs this deal more than Xi does. It means that the ball is in China’s court.”

Elena Neroba Maxigrain Business Development Manager

In the forthcoming days, it will be the 2nd anniversary of the longest and deepest Trade War in the modern World between the top two economies of the world. On February 7, 2018, President Trump has ordered three separate tariffs on products imported into the United States: • Section 201 “safeguards” for importations of large residential washing machines and solar panels; • Section 232 tariffs for importation of steel and aluminum; and • Section 301 tariffs on certain products imported from the People’s Republic of China.

China reacted on April 2, 2018, with 232 tariffs. But on May 1 and July 1, 2018, MFN cut tariffs on pharmaceuticals, consumer goods, autos, and IT products. That was just a workout. In international economic relations and international politics, most favored nation (MFN) is a status or level of treatment accorded by one state to another in international trade. The term means the country which is the recipient of this treatment must nominally receive equal trade advantages as the "most favored nation" by the country granting such treatment (trade advantages include low tariffs or high import quotas). From that time to September 17, 2019, there were 10 more ping-pong tariffs waves and Trump’s almost weekly tweets about “almost deal”. Each time China bought a few vessels of soybeans and Chicago became green. But if we look closer, we will see two main points at China’s side: ASF cut by up to 40% of pigs (according to market data) and Brazil increased soy exports to China – so this is the big question – does China need the US soy or not?

The terms of the phase one deal announced on December 13 between the Trump administration and China have established new US tariffs toward imports from China for the foreseeable future. Average US tariffs on imports from China will remain elevated at 19.3 percent, even after the deal is implemented, which is currently expected for March 2020. Let’s keep in mind, that now it’s 21% on both sides and before the trade war began in 2018 it was 3.1% on China’s side and 8% on the USA.

The details of the phase one deal may include China cutting more of its tariffs on US exports, given Trump administration statements that the deal includes Chinese commitments to make additional purchases of "no less than $200 billion" of US products over the next two years. In agricultural purchases, it was promoted to increase imports up to $50 billion of US products. But if we try to compare the best trade years numbers, it’s clear to understand that it’s more impossible: corn best years were 2011 - $13,7 bln or 2018 – 69,75 MMT, soybeans – 2012 - $24.8 bln or 2016 – 57.8 MMT, wheat – 2008 - $11.3 bln or 1981 – 43,9 MMT, pork – 2014 – 6,65 bln or 2017 – 2,45 MMT. We extremely should bear in mind that none of them were in the same year and max value is different from volumes as well.

Furthermore, throughout the trade war, China has consistently timed most of its tariff actions—both retaliatory tariffs increase and decisions to hold off previously announced increases—to coincide with Trump's tariff changes going into effect.

The only one who benefits from this Trade War is Brazil and Argentina, but will they hold it in 2020? New numbers of daily purchases from China are interesting, November US soy import is 124% from October, but it’s still far from target and looks like China is waiting for Brazilian new crop.

While both sides announced ceremony of signing, the market supported it, and logically US farmers need to understand what to plant in spring company– they turn from soybeans to corn knowing the ratio between CBOT futures. Let it be your homework– to calculate it on your own and try to choose.

Farmers are struggling to feed their families amid bad markets and Trump’s policy. As 2020 will be the election year and agricultural producers are the main electorate, Trump needs this deal more than Xi. It means that the ball is in China’s court.

The biggest question is to feed the people: meat is overpriced and stocks are empty. Producers need 180 days to grow pig or 30 for chicken. Those counties that will supply meat will be protein consumers. But even all together LatAm, EU and the USA couldn’t satisfy the lack of meat at one time. That means pork prices will increase and support the protein complex. The USA Today thinks that if part of tariffs is avoided, the trade war is over and the USA to win under Trump, it’s not. China has sources for soy and meat within the USA and can wait till USA president’s election but Trump who is now impeached formally – not.

If we look deeper, we will see that the Trade War is not only about agriculture. China consumes around half of the global production of aluminum, copper, coal, nickel, and wool. And this Trade War is an important driver behind swings in commodity prices. China needs to penetrate EU markets and will put more effort into it while the USA warring about a lot of problems over the World.

Now that the date of signing the agreement has been set again, the Americans have announced that China will buy huge amounts of US agricultural products, although Beijing recently announced that it does not intend to increase import quotas. And the events in the Middle East became the cherry on the cake.

The more statistics we add to understand what will happen, the farther away we will be from the result. The more numbers we will add in to understand what will happen, the more we will move away from the result. China is not interested in war; they are keen on the trade. But get a book on Chinese history – they are the best in both.