Are Trump’s tariff threats getting results?
After previous ‘deal or tariff’ deadlines have been rolled back, the most current deadline of 1st August is rapidly approaching. It may be no coincidence that a number of trade deals have been made with the US in recent weeks.
The most recent trade deal being touted by the US was a ‘mega’ deal done with Japan. The finer details are only coming to light, but
the bones of the deal per the White House include Japanese investment of US$550B in the US and an
agricultural deal worth US$8B. Eagle-eyed analysts suggest pre-trade deal US agricultural imports into Japan
were already worth US$12B. The deal still imposes a 19% tariff on Japanese imports, which is down
on the 25% initially levied.
Last week, Indonesia signed a deal removing nearly all tariffs on US
imports as well as committing to lifting US wheat imports from roughly 480kmt
to 1mmt annually, nearly US$15B in energy purchases and 50 Boeing aircraft. In
return, the US will cut its tariffs from 32% to 19% on all Indonesian imports.
It is also believed that the EU27 is close to inking a deal aimed at staving off the 30% tariff that was due to come into force at
the deadline.
Yesterday, the Australian government which has a trade deficit with the US eased restrictions on US-origin beef imports. The ban, first applied in 2003 due to the
presence of BSE in US cattle, appeared to be a sticking point with the US
Administration. While the US beef herd is at its lowest point in decades, it is
unlikely we are going to see Aussie supermarkets flooded with US cuts of beef.
While our Government is quick to point out that the decision was made on solid scientific
data, the timing could be viewed as an attempt to avoid the pointy end of any
potential punitive tariffs.
The news of these trade deals has been viewed very positively in the
stock market having closed at record highs overnight. Will it have any bearing
on agricultural derivatives and prices? I’m struggling to see any. The real test of this will be if the US can
reach a trade deal with China which will need to include corn and soybeans
exports. Currently China have pivoted away from the US and is buying these core
feedstocks from Brazil.
The wheat market is in the doldrums at the moment, weighed down by
improving weather conditions and the stream of new crop coming into the
pipeline. Early harvest delays in Russia coupled with poor early yields, added
some support, with July Russian exports flagged to be the lowest since 2020.
However, as harvest moves into the Central regions, yields look to improve and
so will the delivery of grain to ports.
Next week
If Russian export volumes pick up as expected, then corresponding FOB values are likely to fall as exporters compete for the thin consumer demand.
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Our team of market analysts are recognised as leaders in Australian Ag market analysis, providing invaluable insights to help you navigate the ever-changing commodity landscape.
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Trade deals making agriculture great again?
The most recent trade deal being touted by the US was a ‘mega’ deal done with Japan. The finer details are only coming to light, but the bones of the deal per the White House include Japanese investment of US$550B in the US and an agricultural deal worth US$8B. Eagle-eyed analysts suggest pre-trade deal US agricultural imports into Japan were already worth US$12B. The deal still imposes a 19% tariff on Japanese imports, which is down on the 25% initially levied.
Last week, Indonesia signed a deal removing nearly all tariffs on US imports as well as committing to lifting US wheat imports from roughly 480kmt to 1mmt annually, nearly US$15B in energy purchases and 50 Boeing aircraft. In return, the US will cut its tariffs from 32% to 19% on all Indonesian imports.
It is also believed that the EU27 is close to inking a deal aimed at staving off the 30% tariff that was due to come into force at the deadline.
Yesterday, the Australian government which has a trade deficit with the US eased restrictions on US-origin beef imports. The ban, first applied in 2003 due to the presence of BSE in US cattle, appeared to be a sticking point with the US Administration. While the US beef herd is at its lowest point in decades, it is unlikely we are going to see Aussie supermarkets flooded with US cuts of beef. While our Government is quick to point out that the decision was made on solid scientific data, the timing could be viewed as an attempt to avoid the pointy end of any potential punitive tariffs.
The news of these trade deals has been viewed very positively in the stock market having closed at record highs overnight. Will it have any bearing on agricultural derivatives and prices? I’m struggling to see any. The real test of this will be if the US can reach a trade deal with China which will need to include corn and soybeans exports. Currently China have pivoted away from the US and is buying these core feedstocks from Brazil.
The wheat market is in the doldrums at the moment, weighed down by improving weather conditions and the stream of new crop coming into the pipeline. Early harvest delays in Russia coupled with poor early yields, added some support, with July Russian exports flagged to be the lowest since 2020. However, as harvest moves into the Central regions, yields look to improve and so will the delivery of grain to ports.
Next week
If Russian export volumes pick up as expected, then corresponding FOB values are likely to fall as exporters compete for the thin consumer demand.
Have any questions or comments?
Click on graph to expand
Data sources: S&P Global, SovEcon, Reuters, Bloomberg, Next Level Grain Marketing, Mecardo
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Have any questions or comments?
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Independent analysis and outlook for wool, livestock and grain markets delivered to you as it’s published
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Join the Mecardo team for the Commodity Conversations podcast, where we provide short weekly market recaps and longer conversations with guests to discuss the drivers and trends in livestock, grain and fibre markets.
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Our team of market analysts are recognised as leaders in Australian Ag market analysis, providing invaluable insights to help you navigate the ever-changing commodity landscape.
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We don’t just bring you the most up to date market insights. Find out more about Mecardo’s services including risk management advisory, modelling, benchmarking, research & consultancy.