We have used this space many times over the last two years to grumble about the impact on agriculture of the Trump administration's trade war with China.
Today, we give credit where it's due on this front.
Last month, the U.S. and China signed what is called a "Phase One" trade agreement.
Not only does the deal provide evidence of a thaw in trade relations between the two countries and hint at more progress to come, but it provides a welcome, needed boost to the farm economy shouldering a heavy burden in this dispute.
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Under the new agreement, both countries will cut existing tariffs in half on goods totaling tens of billions of dollars. In addition, China will make a significant increase in purchase of U.S. goods over the next two years, resulting in an increase in U.S. exports to China of more than $260 billion in 2020 and some $310 billion in 2021 (in 2017, the year before the trade war began, China bought American products totaling $185 billion).
Agriculture goods - including pork and soybeans, products targeted for retaliation by the Chinese in its trade fight with the U.S. - account for a big share of those purchases. Under the agreement, China will buy an additional $12.5 billion of farm products in the first year and $19.5 billion in the second year, if the agreement holds. When the U.S.-China trade fight began in 2018, China was the world's second-largest importer of U.S. agriculture products. Those imports fell from more than $20 billion in fiscal 2017 to $16.3 billion in fiscal 2018 and were forecast to decline even more, to $6.5 billion, in fiscal 2019.
The welcome news of U.S.-China trade progress comes at a time of two other positive trade developments for American sellers, including agriculture producers:
* Last month, President Trump signed the United States-Mexico-Canada Agreement, a modernized replacement for the 25-year-old Clinton-era North American Free Trade Agreement. For agriculture, the agreement will maintain NAFTA's duty-free access to the important Canadian and Mexican markets (almost half of Iowa's exports go to those two countries) and expand opportunities for farm exports to Canada and Mexico (the USMCA is expected to increase annual U.S. agriculture exports by $2.2 billion, according to the U.S. International Trade Commission).
* A trade deal between the U.S. and Japan under which Japan reduced or eliminated tariffs on beef, pork and additional U.S. agriculture products to the same levels it grants other trading partners in the Trans-Pacific Partnership trade agreement took effect this year.
In December, Iowa's Revenue Estimating Conference projected state revenue for this fiscal year will grow to $8.015 billion — a $155.8 million increase over last year. That news, along with the aforementioned positive trade news, provide encouraging economic signs for Iowa and the farm sector so important to its fortunes.