Chad Hart, associate professor of economics and crop markets specialist at Iowa State University, said he was encouraged by the meeting between President Donald Trump and Chinese President Xi Jinping at the G20 summit in Argentina on December 1.
On December 3, Trump said relations with China had taken a “Big leap forward.”
Trump said the United States would delay raising tariffs on Chinese goods for 90 days and the Chinese agreed to purchase more American goods.
U.S. stock markets rallied for a day following the announcement.
The next day, the markets retreated by nearly 800 points as uncertainty mounted about the details of the actual agreement between Trump and Xi.
“Before this meeting, we were taking one step forward, two steps back,” Hart said. “Now, hopefully, we’re taking two steps forward, one step back.”
He said the positive outcome of the meeting was that both sides continue to talk.
“I think this is the start of the process,” Hart said. “President Trump and President Xi, by all indications, had a fairly good discussion because it has led to further negotiations.”
He believes the United States/China trade relationship will continue to be rocky for a while, but both countries seem interested in resolving the issues.
“The biggest thing in the next couple of months is we hope meetings continue to happen,” Hart said. “I think they will and I think you’ll see signs from both countries of trying to show good faith in these negotiations.”
He believes China will make some agricultural purchases to show the country is serious about normalizing relations.
“I think you’ll also see the U.S. make some moves,” Hart said. “For example, when President Trump said he would hold off on the tariff increases and keep them where they are now, that’s showing that he’s taking something he had originally planned
and is pulling back on that. Those will be signs that negotiations are progressing and that both sides are making concessions to ease the process along.”
The recently negotiated United States-Mexico-Canada Agreement (USMCA), which Trump intends to have replace NAFTA, must still be ratified by Congress to take effect.
On December 1, Trump threatened to unilaterally terminate NAFTA to force Congressional approval of USMCA.
“I’ll be terminating it within a relatively short period of time,” Trump said. “We get rid of NAFTA. It’s been a disaster for the United States.”
Hart said he believes Congress will have a good debate about USMCA.
“There will be a lot of arguing, but I think at the end of the day we will pass it,” he said, “because this was, for the most part, a reaffirmation of what
NAFTA did. Congress was comfortable with NAFTA, so they should be comfortable with USMCA.”
Soybean markets improved initially following Trump’s announcement, Hart said.
“The idea is we are gaining some of that market back,” he said.
“I think a lot of people are hopeful that we’ll reestablish trade relations with China and if we do, that does mean strengthening markets in the future.”
Trump’s trade wars have cost Nebraska farmers up to $1 billion, according to a December 3 report from the Nebraska Farm Bureau.
Hart recently helped prepare a report on Iowa’s economic losses due to the trade disputes for the Iowa State University Center for Agricultural and Rural Development (CARD). (See sidebar.)
“In Iowa, across these various disputes, we’re probably talking about $1 billion to $2 billion in losses to the agriculture side,” he said.
Continuing with tit-for-tat tariffs will not resolve the trade differences between the United States and China, he said.
“You have to have trade negotiators getting in the same room with each other to hash out these issues because they are much more complicated than just the tariffs,” Hart said.
He said the market’s negative reaction to the trade uncertainties on December 4 was predictable.
“It’s not surprising to me that we have taken a step back in the markets because we still don’t know what any sort of agreement will look like,” he said.
“We react initially that they got together and agreed on something, but then the question is always, ‘but what?’. When you have that ‘but what?’ question, you tend to see the markets step back again.”
Continuing to talk remains the key, he said.
“You can’t have any forward progress without negotiation,” Hart said. “So at least we’re getting that.”