What Happens in the Aftermath of the U.S.-China Trade War?

Officials from the U.S. and China are expected to sign the phase one tariff agreement at a meeting in mid-November. While the agreement might be cause for cautious optimism, it does as much to show just how far apart the two countries really are.

A recent Bloomberg report shared the highlights of what’s in the agreement, and perhaps more importantly, what’s not. The U.S. agreed to not raise the tariffs collected on $250 billion worth of imports to 30%. The challenge? The tariff is still at 25%. Other tariffs that were imposed 1 September are not part of the deal.

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China has also agreed to purchase soybeans (and pork) from the U.S., which will certainly help U.S. farmers many of whom have suffered with the imposition of tariffs.

What’s missing, among other things, is a plan to resolve the remaining issues. This small agreement is a step in the right direction but unless there are several more steps down the path, the trade war will continue to wreak havoc with the global economy in general and the ag chem industry in particular.

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If there is one good thing that comes out of this, many ag chem buyers are looking at alternative suppliers. There is no doubt China will remain the dominant provider of raw materials to the rest of the world. There’s no easy nor quick way to replace the products China has been supplying for decades. But that doesn’t mean that some countries (and companies) aren’t trying. As supply lines through China have dwindled or evaporated, companies are looking to India and other parts of the world as alternatives.

The question becomes, what long-term effect will the disruption have? When China does return to its full manufacturing capabilities, will companies abandon their new supply chains and return to their old ways or will they keep the new suppliers close to avoid future interruptions?