Trump takes action against China and tensions increase

Legislative Watch: U.S.-China spat continues; ag export projections lowered; CFAP payments made; PPP rules relaxed; legislation offers sanitation tax credits.

P. Scott Shearer, Vice President

June 5, 2020

4 Min Read
China and U.S. flags
Getty Images/Brendan Smialowski

The disagreements between the United States and China continues to intensify after President Trump announced last Friday steps he was taking against China for tightening control over Hong Kong and China's handling of the coronavirus pandemic.

The actions announced include plans to revoke preferential trade treatment for Hong Kong; sanction Chinese and Hong Kong officials involved in revoking Hong Kong's autonomy; bar certain Chinese nationals from entering the United States; and pulling out of the World Health Organization.

Trump says, "We will take action to revoke Hong Kong's preferential treatment as a separate customs and travel territory from China. Our actions will be meaningful."

China responded by announcing it was suspending the purchase of U.S. agricultural commodities. Soybeans and pork were specifically mentioned, according to Bloomberg News and Reuters. However, on Monday China purchased three cargoes of U.S. soybeans.

A question being asked is, if Trump revokes preferential trade treatment and decides to raise tariffs on imports from Hong Kong how will Hong Kong react? Currently, the only tariffs Hong Kong charges on U.S. agricultural products are on alcohol and tobacco products.

Hong Kong, according to the Foreign Agricultural Service, is the ninth largest export market for U.S. agriculture. According to the U.S. Trade Representative, total agricultural exports to Hong Kong totaled $4 billion in 2018. Major exports were tree nuts ($1.1 billion), beef and beef products ($966 million), poultry meat and products ($431 million), pork and pork products ($282 million) and fresh fruit ($237 million).

USDA lowers FY '20 ag export estimates
USDA's Economic Research Service's latest forecast lowered fiscal year 2020 U.S. agricultural exports to $136.5 billion which is $3 billion below its February forecast. ERS says the COVID-19 outbreak "will cause an unusually high level of uncertainty" for the foreseeable future.

The lower exports are primarily due to reductions in bulk commodities including soybeans, corn, cotton and wheat. Soybeans were lowered to $16.5 billion, a $1.9-billion decline, as a result in part to increasingly competitive Brazilian exports. Corn exports are forecast at $8 billion, down $500 million. Cotton exports are estimated at $5.2 billion, down $1 billion due to reduced foreign demand. Wheat exports are lowered to $6.1 billion, down $300 million as a result of larger global supplies and uncompetitive U.S. pricing. Livestock, poultry and dairy exports remains at $32.4 billion, with stronger pork and dairy products exports offsetting the decline for beef and poultry products. Pork exports are estimated at $6.9 billion or a $200-million increase.

U.S. agricultural exports to China for FY '20 are forecast at $13 billion, a decrease of $1 billion from the February estimate. This is partly as a result of China buying record amounts of Brazilian soybeans.

U.S. agricultural imports for FY '20 are projected at $130.2 billion, down $3.2 billion. The decline is for projected decreases in imports of beer, fresh fruits, fresh vegetables, etc.

First coronavirus food assistance payments made
The Farm Service Agency has approved over $545 million in Coronavirus Food Assistance Program payments to producers who have applied for the program. So far, over 86,000 applications have been filed.

FSA began taking applications on May 26 and already has made payments to over 35,000 producers. The top five states for CFAP payments are Illinois, Kansas, Wisconsin, Nebraska and South Dakota.

PPP rules relaxed
Congress passed bipartisan legislation giving greater flexibility for businesses and farmers in using Paycheck Protection Program loans. The legislation increases the duration of the PPP loans to 24 weeks from eight weeks. The deadline to rehire workers is extended to Dec. 31.

Under the legislation, the amount of the loan that must be spent on payroll expenses for the loan to be forgiven is reduced from 75% to 60%.

Tax credits for sanitation and PPE expenses
A coalition of business associations is asking Congress to support the "Clean Start: Back to Work Tax Credit" legislation which would provide companies a 50% tax credit to help offset unforeseen sanitation and personal protective equipment expenses as a result of COVID-19. The temporary tax credit would apply to purchases made through March 2021. The maximum would be $25,000 per business location and $250,000 per business entity. President Trump signed this legislation into law today.

Those supporting the bill include the National Restaurant Association, North American Meat Institute, American Car Rental Association, and American Hotel and Lodging Association.

The bipartisan legislation was introduced by Congressman Daren LaHood (R-IL) and Congresswoman Stephanie Murphy (D-FL).

Source: P. Scott Shearer, who is solely responsible for the information provided, and wholly owns the information. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.

About the Author(s)

P. Scott Shearer

Vice President, Bockorny Group, Inc.

Scott Shearer is vice president of the Bockorny Group Inc., a leading bipartisan government affairs consulting firm in Washington, D.C. With more than 30 years experience in government and corporate relations in state and national arenas, he is recognized as a leader in agricultural trade issues, having served as co-chairman of the Agricultural Coalition for U.S.-China Trade and co-chairman of the Agricultural Coalition for Trade Promotion Authority. Scott was instrumental in the passage of China Permanent Normal Trade Relations and TPA. He is past chairman of the USDA-USTR Agricultural Technical Advisory Committee for Trade in Animals and Animal Products and was a member of the USAID Food Security Advisory Committee. Prior to joining the Bockorny Group, Scott served as director of national relations for Farmland Industries Inc., as well as USDA’s Deputy Assistant Secretary for Congressional Affairs (1993-96), serving as liaison for the Secretary of Agriculture and the USDA to Congress.

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