Economy

Impact of U.S.-China trade tariffs on U.S. companies

Impact of U.S.-China trade tariffs on U.S. companies

President Trump may have struck a deal with the European Union to drop trade barriers and increase the number of USA imports, but some American farmers remain uncertain about what that means for their businesses. The National Association of Manufacturers has said USA businesses pay $1 million a day on such import duties.

This is a prudent position given that on the same day the deal was announced, some of President Trump's senior advisers believed he was on the verge of escalating the trade war with a 25 percent tariff on almost 200 billion USA dollars of imported automobiles, according to The Washington Post.

Those commodities are soybeans, sorghum, corn, wheat, cotton, dairy, and hogs. While some farm groups applauded the handout, many - farmers, farm associations and members of Trump's party in Congress - criticized it.

Others have likened it to a form of unwanted welfare that may eventually put farmers in a worse spot. China doesn't want a trade war, but is not afraid of and will fight one when necessary.

The National Farmers Union's senior communications VP, Rob Larew, told CBS News, "The reality is that any deal with Europe for soybeans would make up but a sliver of the market loss happening in China, and it would not have the kind of positive impact on farm prices that the farm sector needs right now".

Threatening to impose 10% tariffs on over $500bn of Chinese imports - from baseball gloves to badger hair, frogs' legs to toilet paper - Trump reiterated his intention to dramatically narrow the United States' trade deficit with its greatest economic rival.

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Trump knows that most of our trading partners don't really want free trade; they want managed trade, where they can get access to USA markets while protecting certain industries from US competition. Using food in a trade dispute is a lose-lose.

Last week's announcement came as a surprise to many as the meeting came just one week after Mr. Trump referred to the European Union as a "foe" of the U.S. On Thursday, however, Mr. Trump said the U.S. and European Union are establishing an executive working group to hash out details on trade and assess existing tariffs "to the betterment of both".

Subsides can be used by governments to offset tariff cuts.

For one, this program can not create additional foreign demand that does not exist. Soybean prices have plunged 18 percent in the past two months.

Moody's Analytics estimates that if the tariffs were imposed on autos and most Chinese imports and other countries retaliate as expected, annual USA growth would slow by 0.5 percentage point by mid-2019.

The U.S. "heavily insisted to insert the whole field of agricultural products" in the negotiations, Juncker later told reporters, according to the Journal.

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Chinese demand was a driving factor, and today the East Asian country accounts for one-third of global soybean consumption.

The United States is the second biggest exporter of soybeans after Brazil and its global export share is 37.2 percent.

Now as the U.S.is seeking to address that imbalance, Washington has followed through with threats of the first round of sanctions on Chinese products.

It is clear that USDA's efforts are not going to establish a comparable trade relationship anytime soon. The proposal of a food purchase and distribution program, although not exactly the same, sounds alarmingly similar to the Chinese strategy of state purchasing.

USDA's Food Purchase and Distribution Program is meant to purchase unexpected surpluses of affected commodities for distribution to food banks and other nutrition programs. Pork also saw price drops, along with sorghum, milk, fruit and nuts.

No Mississippi Republican politician running for election this November was among those criticizing Trump's tariffs or the bailout. The 25% tariff Trump slapped on most steel imports in March helped revive a steel plant here that had been forced to lay off roughly 2,000 workers in 2015.

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