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A Potential Break-Through on U.S.-China Trade?

Oct 15, 2019

Last week, it was reported that the United States and China had reached a tentative, “phase one” trade deal in which Beijing agreed to limited measures to improve trade between the countries. President Trump told news reporters that the deal would take several more weeks to write and many more details needed to be ironed out, but the President called the deal “significant” and suggested “phase two” and “phase three” agreements may be on the horizon. Trade analysts following the U.S.-China talks say the parties may be looking to sign a deal next month when U.S. and Chinese leaders will be in Chile for the Asia-Pacific Economic Cooperation (APEC) event.

IDFA is hopeful, on behalf of our members and the entire dairy industry who have been dealt a severe blow by the U.S.-China trade dispute, that last week's news signals tangible progress between the United States and China. However, we regard all things related to U.S.-China trade as tentative until details are released and a deal is signed by both parties.

Early reports indicate the deal includes commitments by the Chinese to purchase $40-$50 billion in agricultural goods. This is a significant amount considering China imported a then-record $26 billion of U.S. agricultural goods in 2012. No additional details are available on the potential benefits to dairy and other agricultural goods. The U.S. Treasury is also evaluating whether to rescind the designation made this summer that China is a currency manipulator. For now, the tariff rate increase (from 25% to 30%) scheduled for October 15 has been delayed indefinitely; there is no information yet on whether the parties will postpone the tariffs scheduled to go into effect in December.

IDFA will continue to monitor progress in U.S.-China talks. It is IDFA’s position that all trade deals, including a potential deal with China, should be comprehensive in nature based on a market- and rules-based system of international trade that is essential for the U.S. dairy industry.

Additional Background on China

The governments of China and the United States have imposed billions of dollars in retaliatory tariffs during the nearly two-year trade dispute, which has put a drag on America’s dairy industry. U.S. dairy export value to China peaked in 2017 at $577 million, fell 29% to just over $500 million in 2018, and have fought to $250 million through August of this year. Until this year, China had become the leading market for U.S. whey and a growing customer for U.S. cheese. Retaliatory tariffs, however, have derailed that potential and cost the U.S. dairy industry millions in sales, market share and jobs. Overall exports of U.S. dairy to China have sunk 33% in value from January-August 2019 when compared to the same period in 2018 and 2017. 

According to IDFA’s latest China Fact Sheet, China bought 33% of U.S. whey exports by value in 2018. Overall, shipments added up to $174 million. Year-to-date through August 2019, with retaliatory tariffs still in place, exports declined by 45% year-over-year.

More information on China and other pending and new trade deals can be found in IDFA's Trade Toolkit

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