China is providing some clarity on tariffs.In response to President Trump lowering the fentanyl tariff from 20% to 10%, China dropped it 15% retaliatory tariffs imposed on U.S. ag goods March 4 for one year.
However, Mark Knight, Farmer’s Keeper Financial says they didn’t eliminate all of the reciprocal tariffs on ag goods,"China did keep 10% tariffs in place. So,it’s really a 13% total tariff for incoming soybeans. Argentina and Brazil get charged 3%. And so we’re still 10% higher than that.”
Which he says makes it tough for U.S. soybeans to compete for China business.
“So we’re a little bit more expensive, you know, ballpark a dollar than Brazil right now,” he adds.
As a result, China reportedly bought soybeans from Brazil this week according to Randy Martinson, Martinson Ag.
” That was the report yesterday is that they bought 10 cargoes for December delivery. The other 10 were for that February to July delivery time frame. And this, you know, it’s not normal for Brazil to be selling soybeans to China in December.”
While the Chinese government owned grain entities can wave the tariff, private crushers cannot. So, with the 13% tariff on U.S. beans it may keep Chinese crushers out of the market. Knight says, “Yes, the government has stepped in just to, you know, try to show good faith and and hopefully meet their expectations from this trade deal of 12 million metric tons. But private sector has no reason to, they’re all going to be price driven.”
So the question is will China uphold the new purchase agreement or does the new deal have a commercial consideration out clause like the Phase One deal?
Martinson says, “As soon as we get the trade deal signed by both countries, we’ll be able to see a little bit more of the details. But as of now, it looks like it might be a little bit closer to what the phase one trade deal was.
Meanwhile, the market is watching the Supreme Court case on the constitutionality of Trump’s IEEPA tariffs.
Knight says, “The way they’ve been voting as of late, generally with the Trump administration, I’m not expecting them to voting, you know, when its all said and done to go against them.”
Martinson says even if the ruling goes against the administration they have a alternative tariff options, “If they find it so that he has to back away from the current method of tariffs, he’ll come in with a different method of putting the tariffs on and still use them.”
Which means the administration will continue to use the tariffs as leverage for further trade deals.
