Analysts Urge Caution As Nebraska Farmers Await More Details On Trump, China Trade Deal

The Nebraska Farm Bureau estimates the state will lose close to $1 billion due to retaliatory tariffs this year. (Scott Friend & Joe McMullen, NET Nebraska)
Jill O'Donnell, Director of the Yeutter Institute for International Trade and Finance. (NET News)
October 18, 2019 - 9:00am

Nebraska producers are cautiously optimistic about a possible trade deal with China, but economists warn that the agreement is far from final. 

Last week President Trump announced what he calls "phase one" of a larger trade deal with China, according to NPR

The U.S. was scheduled to raise tariffs on about $250 billion worth of goods on October 15. As part of the deal, Trump called off that planned increase. 

In exchange, China will purchase up to $50 billion worth of agricultural goods from American farmers over the next two to three years.  

"It is progress," said Jill O'Donnell, director of the Clayton Yeutter Institute of International Trade and Finance. "Any time there is a halt or a freeze in tensions, that is a good thing." 

Nebraska officials expressed excitement about the agreement. 

“Since 2012, exports from Nebraska to China have fallen, and the country has been an uncertain trade partner for our state," said Gov. Pete Ricketts (R-Nebraska) in a statement. "Our farmers and ranchers would like to see more predictable trade that grows over time. [The] agreement is a positive step forward in a long process of achieving this goal and right-sizing America’s trade relationship with China."

The Nebraska Farm Bureau expressed a bit more caution. 

Gov. Ricketts meets with the Prime Minister Nguyen Xuan Phuc of Vietnam in September. (Courtesy: Gov. Ricketts' Office)

"While we are anxious to learn more of the details of this agreement, reports that the deal could include significant increases in purchases of U.S. agriculture commodities beyond previous levels certainly have our attention," said NFB President Steven Nelson in a statement. "It’s our hope that this is the first step in resolving the ongoing trade dispute with one of the largest consumers of Nebraska agriculture products."

But O'Donnell is quick to point out the deal isn't final. The verbal agreement may become official at the Asia-Pacific Economic Cooperation (APEC) Forum beginning Nov. 11. But a lot could change between now and then. 

The hope of selling up to $50 billion in agricultural goods to China is enticing, but O'Donnell says we don't know any details. 

"We don't know over what time frame exactly that would play out," she said. 

Governor Ricketts visited Vietnam and Japan last month to promote Nebraska's ag products. According to a press release, Nebraska's beef exports to Vietnam grew 127% from 2017 to 2018. 

There is hope to expand trade in other parts of the world, but O'Donnell says that won't solve everything. 

"It's difficult to recover that lost ground by sending goods to other countries," she said. "China is likely to remain a really important source of demand for U.S. agriculture, so it's not going to be easy to make that up on a quick time frame." 

Meanwhile, some Nebraska producers are getting hit on both sides. A tractor producer, for example, faces steep tariffs on imported steel — but farmers are less likely to buy new combines when their own market is stunted by tariffs. 

O'Donnell says trade is a lot more complex in recent years because of policy differences in things like plant and animal health regulations, making it difficult to move products across borders. 

"It's definitely a complex time, these last couple of years," O'Donnell said. "And I think the U.S. and others around the world are trying to find a new normal and a new footing for trade." 

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