G-20 summit - View from the US

American farmers see light at the end of the tunnel

Markets are bound to be relieved that China and the US have paused their trade war, opening a 90-day window for negotiations as their two leaders met over dinner in Argentina on the sidelines of the Group of 20 summit on Saturday.

For American farmers, who have suffered since President Donald Trump unleashed tariffs on China and Beijing hit back with its own tariffs, mostly on American agricultural products, the truce is light at the end of the tunnel of falling profits.

And that is important for President Trump as Chinese tariffs were affecting his power base, the rural heartlands of the Midwest which export commodities like soya beans and sorghum to China.

American farm income is expected to drop 13 per cent this year, according to the Department of Agriculture. If negotiations are successful, next year could bring relief in time for the President's 2020 re-election campaign.

The President can claim the truce - even if temporary - as a reward for his all-or-nothing approach to remedying the United States' trade deficit with China, and forcing China to open up its own market.

While Mr Trump has drawn praise for finally taking on China, his methods have raised fears of a deeper and wider trade war that would eventually cost more jobs than it creates.

But on board Air Force One on the way back to Washington, he told reporters: "It is an incredible deal. What I will be doing is holding back on tariffs. China will be opening up, China will be getting rid of tariffs. China will be buying massive amounts of products from us."

 
 
 

That the deal was done at the leaders' level also underscores a particular phenomenon of the Trump presidency.

Personal chemistry between President Trump and foreign leaders - in this case China's President Xi Jinping - and Mr Trump's appetite for deal-making matter more than painstaking negotiations at the level of senior officials.

"We are encouraged to see Presidents Trump and Xi working together to reduce trade barriers between the US and China," said the Consumer Technology Association, a US trade group that opposes tariffs.

US analysts were cautiously optimistic, noting that all tariffs so far imposed remain in place.

It was agreed in the truce only that the US will not raise tariffs a further 25 per cent on Jan 1, and the negotiation window is for only 90 days. If talks do not produce results, the 25 per cent additional tariffs will go into force after 90 days.

The Chinese have long been willing to buy more US goods, help fight fentanyl abuse and launch trade talks, said Dr Bonnie Glaser, senior adviser for Asia and the director of the China Power Project at the Centre for Strategic and International Studies.

A statement from White House press secretary Sarah Sanders noted that China has agreed to start purchasing agricultural products from US farmers "immediately".

The statement also noted that China would purchase a "not yet agreed upon, but very substantial" amount of agricultural, energy, industrial and other products.

That President Xi agreed to designate fentanyl a controlled substance, meaning that Chinese selling the powerful synthetic drug to the US will be subject to maximum penalties, is also important to President Trump, who has made fighting America's raging opioid epidemic a priority.

 
A version of this article appeared in the print edition of The Straits Times on December 03, 2018, with the headline 'American farmers see light at the end of the tunnel'. Print Edition | Subscribe