Background trade war
Trade war deadlocked. US pig price gets hit
The United States and China are again at odds in the trade war. US President Donald Trump will introduce additional tariffs on imports, while China has artificially devalued its currency. This has caused considerable turmoil in the financial markets. The American pig price also suffers.
The negotiations between China and Trump are highly erratic. Recently, China did a approach attempt by temporarily abolishing import duties on, among other things, US soybean and pork; however, little is left of that gracious attitude.
After talks between the opponents reached a deadlock again last week, Trump announced via Twitter that he would impose new tariffs worth $300 billion on Chinese goods. These will take effect from September. As a result, China pulled out a new weapon by devaluing the Chinese yuan. This offsets the US import duties, because it makes Chinese goods cheaper for importers.
China cancels American pork
In addition, China has canceled imports of nearly 15.000 tons of pork from the United States. This is slightly less than May's imports, which were worth about $30 million. The move is remarkable, considering the country has a large shortage of pork caused by the outbreaks of African swine fever. However, this doesn't stop the Chinese government from hitting Trump's peasant supporters in their wallets.
US pig prices have been in a minor slump since last week. The pig futures market fell to its lowest level in 5 months, while physical pig prices also took a hit. The Iowa/Minnesota quote plunged in a matter of days by USD 0,22 to USD 1,68 per kilo. European pig prices spinning yarn to the situation and pull hard.
What now?
Negotiations between China and the United States have been going on for more than a year. While a deal recently seemed within reach, the situation now threatens to escalate. The financial markets are therefore under high tension. The Dow Jones index lost about 5% on Monday, August 3, the largest single-day loss this year. The European and Asian stock markets have also lost considerable ground in recent days.
It is rumored that China wants to extend time until the US presidential elections in November 2020. They allude to a new, less protectionist US president in order to reach a deal. For Trump, on the other hand, haste is needed. For him, a good deal would come in handy to show off during his campaign.
His peasant supporters in particular are being hit hard by the consequences of the trade war. The president is trying to compensate for this through compensation of $16 billion† The amounts can amount to several tons of dollars per farmer. The question is whether Trump will keep his voters happy with that in the meantime.
Wouter Job
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