SSGA represented at Ag Transportation Coalition Annual Meeting

By Bruce Abbe

Ag shippers currently face a myriad of issues and challenges in intermodal container transportation, from trucking costs, port congestion, coming cost increases from the pending low sulfur fuel mandate, demurrage and detention penalties, and more. Those attending last week’s national Agriculture Transportation Coalition (AgTC) Annual Meeting in Tacoma, Wash., heard a very sobering take on the “elephant in the room” for exporters – the unknowns and dim prospects surrounding the future of trade between the U.S. and its largest ag export customer: China.

AgTC’s annual meeting drew a record crowd of nearly 500 ag export shippers, forwarders and logistics officials. Among them were 18 member companies of the Specialty Soya and Grains Alliance, including SSGA board members Bob Sinner of SB&B Foods, Darwin Rader of Zeeland Farm Services, and Bruce Abbe, past president of Midwest Shippers Association (MSA). Among other current SSGA or past MSA members with multiple staff in attendance were: MacMillan-Piper, Inc., Northwest Seaport Alliance, Professional Export Services, GlobeRunners, Inc., Fr. Meyer’s Sohn NA, LLC – FMS Logistics, Scoular, Laufer Group international, Tacoma Transload, Inc., US Nisshin Shokai, Ltd., Norseman, Toyota Tsusho America, Inc., International Feed, Double River Forwarding LLC, Bluegrass Farms of Ohio, Inc., Ray-Mont Logistics America and Fornazor International.

Erin Ennis, senior vice president of the US-China Business Council (USCBC), told attendees she wished she could bring a more positive message about the prospects for improved trade with China, but international trade industry observers remain very much in the dark about where talks stand. Current posturing of the Trump Administration and its China counterparts does not bode well heading into the next scheduled meeting at the G20 summit in Tokyo at the end of this month.

USCBC works on trade policy on both ends, seeking improved trade flows and fair business operating environment by both the U.S. and China’s government.

Ennis, a ten-year veteran at USCBC and previous staff member at the U.S. International Trade Commission and on Capital Hill, made several observations.

“China has yet to feel the pain of the U.S. tariffs,” she said.

Currency valuation changes have helped minimize the cost impact of the tariffs in place since 2018 so far. But the threatened, pending increases will have an impact if they go through.

“China is preparing for a no deal scenario,” Ennis said.

President Trump has likewise indicated no rush to compromise on the remaining issues under negotiation – some, notably intellectual property and technology rights, that are serious, thorny matters to agree on.

Due for a reset?

Ennis believes that regardless of who won the last election, the U.S. and China would still be in a trade dispute. The relationship between China and the U.S. “was due for a reset,” and there is wide spread views among trade observers from both political perspectives that China is a bad actor. She believes “there has been uniform support for the Administration’s tactics.”

Currently, roughly $267 billion in Chinese goods exported to the U.S. are subject to 25 percent tariffs from the first three lists of products that have been posted since last fall. In addition, some $17 billion in steel and aluminum imports are subject to tariffs. Negotiations are to begin again and if there is no agreement, the Trump administration said it will go forward with tariffs on the remining $300 billion in imported products from China.

Retaliation

If that happens, China will unquestionably retaliate. Ennis estimated that China has retaliated from past Trump tariffs at about 85 percent of reciprocal tariffs at the 25 percent tariff level. Although some ag exports got hit twice so in reality it’s a 50 percent tariff, she indicated. China has also intimated it could take “qualitative,” in addition to “quantitative retaliatory moves.”  Qualitative generally means unspecified challenges on issues like delays and product inspection hold-ups at the ports.

It is unclear how far apart the negotiators are over the intellectual property rights issue, she said.

“Economists say this uncertainty and threats of higher tariffs on trade between the U.S. and China is accelerating the chance for a global recession,” Ennis said.

While some economic forecasters have projected 2020 for a recession, without an agreement and with big increased tariffs on the remaining trade between the two countries, a recession could start in the third or fourth quarter of this year.

In response to a question, Ennis said over the past 16 months China has reduced tariffs on products imported from other countries than the U.S. – consumer products mostly.

“Until there is an agreement, U.S. products will be at a disadvantage,” she said.

Ennis also said we’re not yet at a point of no return, no progress … but as long as the U.S. tariffs are in place, China will have to retaliate.

What does this mean for U.S. agriculture? The hard facts are that as long as the tariffs are in place, you will be priced out of the China market.

For more coverage of the AgTC meeting and the China trade presentation, visit here.