China’s Soybean Move Lands With a Thud for U.S. Farmers

(Bloomberg) --

China’s latest gesture of goodwill in its trade war with the U.S. isn’t having much of an immediate effect where it matters most for President Donald Trump: on struggling American farms.

Beijing gave new waivers to several domestic companies to buy U.S. soybeans free of the tariffs China imposed in retaliation for the Trump administration’s higher levies.

The move gave soybean futures in Chicago a little lift initially Tuesday, but prices stayed below their highs of last week.

The muted uptick may be explained partly by the quantity of China’s potential purchases — reportedly between 2 million to 3 million tons, and some firms already bought about 1.2 million tons.

That’s not a huge amount and would look like more normal purchases in the absence of Trump’s tariffs. In the 12 months through August 2017, the last full marketing year before the trade war started, the U.S. exported a total of 36 million tons of soybeans to China.

Meanwhile, Trump gave his Treasury Secretary Steven Mnuchin a bizarre grilling over China’s targeting of U.S. agriculture, adding to the confusion about the short-term goals in the trade negotiations with a Chinese government that doesn’t seem overly worried about the economic fallout so far.

As the U.S. administration tries to figure out how to proceed, this is an opportune moment for China to offer Trump olive branches to keep talks on track.

Next week the Chinese political calendar is packed with events and holidays to celebrate 70 years of Communist Party rule. So there aren’t likely to be any major developments originating from Beijing until the following week, when Vice Premier Liu He is planning to go to Washington for talks with his counterpart, U.S. Trade Representative Robert Lighthizer.

Charting the Trade War

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Coming Up

• Sept. 25: CPB’s monthly world trade monitor
• Sept. 26: U.S. advanced goods trade balance for August 
• Sept. 24-30: The General Debate of the UN General Assembly
• Sept. 30: Phil Hogan’s hearing to be EU trade commissioner

--With assistance from Megan Durisin.

To contact the editor responsible for this story: Zoe Schneeweiss at zschneeweiss@bloomberg.net

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