It was a hairy day in the markets on Tuesday, with the trade battle between China and the United States playing a major factor.
On Monday night, President Donald Trump informed the U.S. Trade Representative to look at tariffs on an additional $200 billion in imports from China. This is double his original threat of $100 billion and is an addition to the $50 billion that was announced last week and is slated to take effect on July 6th, 2018.
Chinese officials responded to the news with strong words. According to Inside Trade, a Chinese state-run paper ran a story on the topic that included the following:
Faced with this heightened intimidation from the U.S., China has no choice but to fight back with targeted and direct measures aimed at persuading the U.S. to back off, since it appears that any concessions it makes will not appease the Trump administration, which wants to suck the lifeblood from the Chinese economy.
By announcing its plan to impose tariffs on more Chinese goods, the U.S. has escalated its trade assault on China. Beijing will have to ensure that Washington is aware that there will be heavy price to pay every action it strikes against China if it is to avoid being a victim of the Trump administration’s growing blood lust.
A spokesperson for the Chinese Commerce Ministry referred to the U.S. strategy as “blackmail.”
Both sides still have time to negotiate a resolution to these trade grievances, but the July 6th timeline is approaching quickly, and the amount of negotiating happening is somewhat suspect.
Peter Navarro says there are no plans for negotiations with China at this time.
“Our phone lines are open. They have always been open,” he said in just-concluded press call on latest Trump tariff move. “But there is a fundamental reality here and that is that talk is cheap.”
— Shawn Donnan (@sdonnan) June 19, 2018
All major agricultural commodities were lower on Tuesday except for oats, live cattle, feeder cattle and class III milk.
Ted Seifried of Zaner Ag Hedge, on RealAg Radio on Tuesday, noted days like this are rare. “When we opened the day, we were dropping in 5 cent increments (in soybeans). The bottom just fell out. It was kind of wild. We only see days like this every few years or so. It’s been a while that has been this wild during the day session.”
The reality is that it could of been a lot worse. For example, September soybeans finished at $9.00 1/4, which was well off the lows of $8.53 1/2. “At one point today we had Brazilian premiums trading about $2 over the board, and that’s just wild. Brazil did not want to follow us on the way down, and that makes us (the U.S.) very competitive on the global scale.”
With soybeans dropping so significantly in the past 30 days, at some point no matter the tariff, the price will be right for China to make some purchases. “China and everywhere else in the world…at today’s low we were down about 2.50 from the high about a month and a half ago. If we talk about a 20% tariff, we just just took 20% off soybeans.”
Corn finished slightly down in December at $3.75 1/2, down $1.00 3/4 and even traded in positive territory mid day. Many traders are suggesting that corn executed a blow off bottom today. Seifried describes the technical term as “when we run all the stops. Everyone is just bailing out. Guys like me are getting calls from clients first thing in the morning saying ‘get me out of everything.’ Everybody blows out of their position. Then once that panic selling subsides, the buying starts coming back in.”