OMAHA (DTN) -- The U.S. will impose an additional 10% tariff on $300 billion in Chinese goods because China has not moved to buy large amounts of agricultural goods, President Donald Trump tweeted Thursday.
The president increased the stakes of his trade war with China with a tweet at 11:26 a.m. CDT that his trade representatives "have just returned from China where they had constructive talks having to do with a future trade deal."
The president then added, "More recently, China agreed to ... buy agricultural product from the U.S. in large quantities, but did not do so." The president added China President Xi Jinping also had said he would stop the sale of the opioid drug Fentanyl to the U.S., but Trump stated that has not happened "and many Americans continue to die!"
Returning to the topic of trade, the president's third tweet stated the U.S. would put a 10% tariff on $300 billion more in goods and products from China. The tariff follows a 25% tariff now on $250 billion in other Chinese exports to the U.S.
The president then added, "We look forward to continuing our positive dialogue with China on a comprehensive Trade Deal, and feel that the future between our two countries will be a very bright one!"
Markets reacted sharply as September corn closed down 7 1/2 cents, August beans were down 17 cents and November soybeans were down 16 1/4 cents, and September wheat was down 7 cents. October lean hogs were down $3.50 as well. The Dow Jones Industrial Average fell after trading upward before the tweets.
The president increased the tariffs just a day after the Federal Reserve lowered interest rates for the first time in 11 years. Among the reasons the Fed stated for the increase were uncertainty surrounding global growth and trade tensions.
Archer Daniels Midland cited the trade war with China as one of the main reasons the giant grain-and-oilseed trader saw second-quarter earnings fall 41% from a year ago. Poor weather conditions in the U.S., including flooding, was the other major factor, ADM stated. Getting more normalized trade between the U.S. and China is one of the company's expectations for the second half of its fiscal year. ADM cited lagging U.S. exports of grains, soybeans and ethanol.
"Although the timing is uncertain, we remain confident in the resumption of significant food and agricultural trade flows between the U.S. and China, which will help bolster margins in the U.S. grain export and ethanol industries," said Juan Luciano, chairman and CEO of ADM.
Ray Young, ADM's chief financial officer, told analysts on the quarterly call that if agricultural and export sales to China do not improve in the next three months, it would be hard for ADM to come close to last year's profits. Young added that the entire ethanol industry needs better trade or risks seeing more ethanol plants shut down.
Luciano added that African swine fever will have a long-term global impact on protein sales as pork and poultry production are ramping up globally to sell into China. Soybean and soymeal exports will increase globally outside of China to meet that feed demand, he said.
"We have even seen meat companies upgrading their facilities to get ready for demand," Luciano said.
For months, pork producers had been anticipating increased trade with China and potentially greater export sales because of ASF. Yet, the president's move came after USDA released weekly trade reports showing China had canceled orders for 12,200 metric tons of pork for 2019 and another 2,500 metric tons for 2020.
U.S. pork right now faces a 50% retaliatory tariff on top of a standard 12% duty, tweeted Rachel Gantz, a spokeswoman for the National Pork Producers Council. She added, "Were it not for China's trade retaliation, we would be in a strong position to capitalize on this unprecedented sales opportunity in China,"
In soybeans, China now still has 4.25 million metric tons of outstanding sales for the 2018-19 crop with the marketing year ending in 30 days. USDA reported just 68,000 metric tons of soybean sales for the week ended July 25.
The tariffs come a week after USDA announced the details of a new round of Market Facilitation Program payments that will be going to producers this month. USDA has set aside $14.5 billion for the MFP2 after spending more than $8.6 billion on the first MFP payments that began last fall.
Chris Clayton can be reached at Chris.Clayton@dtn.com
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