The National Cotton Council thinks the Phase 1 trade deal with China signed today by President Trump could bring in trade boost to U.S. cotton exports.
The Phase 1 agreement states a chapter on agriculture with Chinese purchases of U.S. products intended to reach at least $40 billion per year starting in 2020. Hence, the overall impact for cotton remains uncertain as commodity-specific details have not been released.
NCC Chairman Mike Tate, an Alabama cotton producer who was at the White House for the signing, said, “While we welcome Phase I and are hopeful about the potential for future increased sales to China, U.S. cotton producers continue to face a challenging economic climate. As such, we encourage President Trump and USDA to follow through with the third tranche of MFP payments as quickly as possible.”
Tate was referring to the Administration’s USD 16 billion trade assistance package through the Market Facilitation Program to help mitigate China’s retaliatory tariffs. He said this assistance, administered by USDA, has been very timely with U.S. cotton’s economic health deteriorating as market share in China is being lost to Brazil and Australia. The first MFP tranche of payments came in August and the second tranche in November.
“Since the middle of 2018, the ongoing trade dispute between the United States and China has been front and centre in any discussion of the cotton market,” Tate said. “Cotton prices remain well below pre-dispute levels due to China’s imposition of a 25 % retaliatory tariff. That’s why removal of these tariffs should be a high priority for any upcoming dialogue between the two countries.”