US-China trade war costs billions of dollars for both sides

Big US automakers have said higher tariffs will result in a hit to profits of about $1 billion this year. (Reuters)
Updated 29 December 2018

US-China trade war costs billions of dollars for both sides

CHICAGO: The US-China trade war resulted in billions of dollars of losses for both sides in 2018, hitting industries including autos, technology — and above all, agriculture.
Broad pain from trade tariffs outlined by several economists shows that, while specialized industries, such as US soybean crushing, benefited from the dispute, it had an overall detrimental impact on both of the world’s two largest economies.

The losses may give US President Donald Trump and his Chinese counterpart, Xi Jinping, motivation to resolve their trade differences before a March 2 deadline.

The US and Chinese economies each lose about $2.9 billion annually due to Beijing’s tariffs on soybeans, corn, wheat and sorghum alone, said Purdue University agricultural economist Wally Tyner.

Disrupted agricultural trade hurt both sides particularly hard because China is the world’s biggest soybean importer and last year relied on the US for $12 billion worth of the oilseed.

China has mostly been buying soy from Brazil since imposing a 25 percent tariff on American soybeans in July in retaliation for US tariffs on Chinese goods. The surge in demand pushed Brazilian soy premiums to a record over US soy futures in Chicago, in an example of the trade war reducing sales for US exporters and raising costs for Chinese importers.

“It’s something that’s crying for a resolution,” Tyner said. “It’s a lose-lose for both the United States and China.”

Total US agricultural export shipments to China for the first 10 months of 2018 fell by 42 percent from a year earlier to about $8.3 billion, according to the US Department of Agriculture.

The most actively traded soybean futures contract averaged $8.75 per bushel from July to December 2018, down from an average of $9.76 during the same period a year earlier. As of Dec. 28, futures in the last month of the year were averaging $8.95-1/2 a bushel. That was down from $9.61-3/4 for all of December last year.

To compensate suffering farmers, the US government has allocated about $11 billion to direct payments and buying agricultural goods for government food programs.

In North Dakota, which exports crops to China through ports in the Pacific Northwest, soy farmers face at least $280 million in losses because of Beijing’s tariffs, said Mark Watne, president of the North Dakota Farmers Union.

It’s something that is crying our for a resolution. It’s a lose-lose for both the United States and China.

“You could almost put another $100 million on top of this because all commodity prices are down and that affects North Dakota farmers indirectly,” Watne said.

China’s tariffs improved margins for US soy crushers such as Archer Daniels Midland Co. by leaving plentiful supplies of cheap soybeans on the domestic market.

Chinese soybean mills, on the other hand, front-loaded soy purchases ahead of the tariffs. This led to an oversupply that reduced Chinese processing margins and led factories this summer to make the biggest cuts in years to the production of soymeal used to feed livestock.

China resumed purchases of US soybeans in early December following a trade truce agreed to by leaders from the two countries during G20 summit in Argentina. But Beijing kept its 25 percent tariffs on the oilseed from America, which effectively curbed commercial Chinese buying.

“With the tariffs, the beans can’t go into the commercial system,” said a manager at a Chinese feed producer, speaking on condition of anonymity. “The buying will have a very limited impact on the market.”

China also suffered as products such as phone batteries were hit by US tariffs, and customers began looking to buy elsewhere.

A study commissioned by the Consumer Technology Association showed US tariffs on imported Chinese products cost the technology industry an additional $1 billion per month.

The conflict also squeezed US retail, manufacturing and construction companies that had to pay more for metal and other goods.

The Big Three Detroit automakers — General Motors Co, Ford Motor Co. and Fiat Chrysler Automobiles — have each said higher tariff costs will result in a hit to profits of about $1 billion this year. Ford and Fiat expect a similar hit in 2019. 


Global renewable power capacity to rise by 50% in five years

Updated 46 min 28 sec ago

Global renewable power capacity to rise by 50% in five years

  • Solar PV will account for nearly 60 percent of this growth and onshore wind 25 percent
  • Falling technology costs and more effective government policies have helped to drive the higher forecasts for renewable capacity deployment

LONDON: Global renewable energy capacity is set to rise by 50 percent in five years’ time, driven by solar photovoltaic (PV) installations on homes, buildings and industry, according to the International Energy Agency (IEA).
Total renewable-based power capacity will rise by 1.2 terawatts (TW) by 2024 from 2.5 TW last year, equivalent to the total installed current power capacity of the United States.
Solar PV will account for nearly 60 percent of this growth and onshore wind 25 percent, the IEA’s annual report on global renewables showed.
The share of renewables in power generation is expected to rise to 30 percent in 2024 from 26 percent today.
Falling technology costs and more effective government policies have helped to drive the higher forecasts for renewable capacity deployment since last year’s report, the IEA said.
“Renewables are already the world’s second largest source of electricity, but their deployment still needs to accelerate if we are to achieve long-term climate, air quality and energy access goals,” said Fatih Birol, the IEA’s executive director.
“As costs continue to fall, we have a growing incentive to ramp up the deployment of solar PV,” he added.
The cost of generating electricity from distributed solar PV (PV systems on homes, commercial buildings and industry) is already below retail electricity prices in most countries.
Solar PV generation costs are expected to decline a further 15 percent to 35 percent by 2024, making the technology more attractive for adoption, the IEA said.
However, policy and tariff reforms are needed to ensure solar PV growth is sustainable and avoid disruption to electricity markets and higher energy costs, the report said.