U.S. wheat added by China to list as part of potential 'trade war'

An April 4 announcement from China to include U.S. wheat on a list of proposed tariff increases on U.S. goods – to counter American moves on Chinese steel, aluminum and more – could constrict Palouse wheat markets.

After the Trump administration put forth its new tariffs plan in mid-March, China’s countermove originally included about $3 billion worth of U.S. imports, but not wheat. Then, after President Trump proposed further taxes of $50 billion on more Chinese imports, China responded, adding more to their list, which now includes wheat.

The developments come after the new Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) was signed March 8 by 11 nations which once included the United States in its negotiations.

That deal will drop tariffs on wheat to Japan for top U.S. competitors Canada and Australia from $150 per metric ton to $85, while the U.S. tariff remains at $150.

The economic impact of this in America, estimated by U.S. Wheat Associates, could be $500 million, from growers to exporters and shippers.

Reciprocal

The overall impact to wheat as part of a potential trade war appears inconclusive.

“Wheat hasn’t shown anything in the market really. The Portland price for soft white,” said Gary Bailey, a third-generation St. John farmer and chairman of the board for Washington Grain Commission. “So no need to panic yet, I guess. The market just hasn’t been taking these into account. Until they start throwing stones at each other. I think it’s just more posturing at this point.”

After the first of the proposed new tariffs from the U.S., President Trump and Treasury Secretary Steve Mnuchin made statements that the U.S. and China could reach an agreement before any tariffs take effect.

At the root of the issue, Trump has indicated, is reciprocal taxes and what the U.S. says is China’s theft of intellectual property.

Trade between the two countries represents more than $650 billion in goods per year – $500 billion bought by the U.S. from China and $150 billion bought by the Chinese from the U.S.

Within this is wheat from the Palouse.

China has bought 12.5 million bushels of soft white wheat this year so far from the northwest, about half of which comes from Washington.

They have recently increased their imports of soft white and other U.S.-produced wheat classes, which the Chinese often mix with domestic wheat and use in flour and other items.

Over the last decade, U.S. wheat exports to China have varied between 6.4 million bushels and 61 million bushels, but exports went up to 154 million bushels in 2013/2014 – making China now no. 4 in U.S. wheat imports.

“It could be a pretty good blow,” Bailey said. “China’s not one of our huge wheat buyers, though no. 4. An important market, but not as consistent as Japan.”

What now?

In China’s move to increase tariffs that included wheat, it also targeted other U.S. commodities soybeans, corn, cotton, sorghum and beef.

The U.S.-China tariffs are set to begin in mid-May.

“I don’t understand it all. It’s way bigger than me,” Bailey said. “The administration has said all along they wanted fair and balanced trade. He’s surely not backed off on that.”

Is it the right way to go? Does the Trump administration have a point?

“If it doesn’t affect you, you probably think it’s right, if not, you probably don’t,” Bailey said. “Whether they’re gonna sling their arrows – that will be time to panic, or not. Markets are not reacting much, which is good news. I still want to remain optimistic. We’re still gonna sell wheat, it’s not like it’s gonna be choked on the Palouse.”

By Garth Meyer

Gazette Reporter

-Eric Weitze photo