Grain, livestock and especially outside markets soared on Wednesday.
Arlan Suderman, StoneX Chief Commodities Economist says the markets reacted positively to the 90-day delay on reciprocal tariffs for countries that reached out to negotiate with the U.S. and did not retaliate.
A 10% universal tariff is still in place but over 75 countries have reached out to avert tariffs and were rewarded.
It was an unprecedented day in the stock market which reversed and surged in reaction.
“Its a smart move by the Trump Administration because it buys them time to negotiate deals with these 75 countries and the markets have time to absorb that news and calm down,” he explains.
Suderman says this also puts to rest the talk of global recession, which had tanked the stock market, the energy sector and even cattle futures.
“I think the market took it as a positive step forward. Now it’s up to the Trump administration to actually come through and turn those negotiations into something positive, meaning lower tariffs for everybody. And if they can do that, we can actually result to see greater global economic growth and greater demand for commodities,” he adds.
The grain and livestock futures also posted a relief rally despite the escalation of the trade war with China.
China announced retaliatory tariffs of 50% which drew a negative response from President Trump as he slapped another 125% tariff on Beijing.
Suderman says, “Ultimately containing China is one of Trump’s top goals and since they
led the way in retaliation, that’s another reason he said that if any country retaliates, we will keep adding to it. Since that’s what they’ve done, he doesn’t want to give any signal of rewarding that type of behavior,”
He says it took Trump three years to get a trade deal out of China in his first term and he is trying to get a quicker response this time around.
“With a weaker economy, he felt like he could do that. Now, I don’t know if we’re any closer to a trade agreement with China, Because right now they feel like they’re being bullied, so their pride is hurt, and so they’re backing off and they’re fighting.”
The Chinese are trying to buy time according to Suderman.
“Hoping that the consumer will turn on Trump, and therefore Congress will turn on Trump and limit his powers or ability to do this. But today’s move kind of cuts that strategy short,” he adds.
The total tariffs on U.S. pork imports into China, according to the U.S. Meat Export Federation, are at 131% and for beef at 106%.
The American Soybean Association confirmed China’s tariffs on U.S. soybeans are now at 114%.
At what point does China finally break down and negotiate?
Suderman says that’s hard to predict.
The grain markets were shrugging off the China news before the tariff delay as Chinese tariffs won’t impact the current soybean crop and the White House also said it was pausing the Section 301 fees on vessels of Chinese origin and is looking at restructuring those fees.
He thinks the markets can go back to trading their own fundamentals and in the case of the grains that includes Thursday’s WASDE.
Suderman anticipates a tightening of the balance sheets, at least for corn which is positive.
