Trade Disputes Continue; Progress with China?

March 21, 2019

Multiple trade disputes continue to be a major market factor for agriculture and the economy as a whole. While progress has been made in talks with China, there is no agreement yet.  Meanwhile, the Trump administration appears to lack enough votes in the House of Representatives to pass the U.S.-Mexico-Canada Agreement (USMCA), which would replace the existing North American Free Trade Agreement. That could change as the administration bargains with lawmakers.

Press reports indicate China may be prepared to make large commitments to purchase U.S. products, including agricultural goods.  Indeed, even without an agreement, China moved markets with a large pork buy.  However, what remains uncertain is what progress can be made on the Chinese practices that started the trade war in the first place, violations of intellectual property rights and forced technology transfers for companies doing business there.

The USMCA’s prospects are in doubt for two reasons.  First, House Democrats are looking for further progress on labor rights in Mexico as well as guarantees about how the pact will be enforced.  Second, influential lawmakers of both parties insist that tariffs on steel and aluminum imported from Mexico must be removed before they will consider the USMCA.  Those tariffs – invoked on national-security grounds – prompted Canada and Mexico to retaliate against U.S. farm products.  It was expected they would be removed once the three countries agreed on the USMCA, but that has not happened, and so the retaliatory tariffs on U.S. products remain in place.