U.S. Congress to advance ‘Hong Kong Human Rights and Democracy’ bill

By Patricia Zengerle

WASHINGTON (Reuters) – U.S. congressional committees are due to start voting next week on legislation supporting human rights in Hong Kong, with measures under consideration including annual reviews of the Chinese territory’s special economic status and the imposition of sanctions on those who undermine its autonomy.

House of Representatives Speaker Nancy Pelosi held a news conference on Wednesday with House members – Republicans and her fellow Democrats – as well as Joshua Wong, Denise Ho and other Hong Kong democracy activists to back the “Hong Kong Human Rights and Democracy Act of 2019.”

The activists have spent much of this week in Washington making their case for U.S. support, including testifying at a congressional hearing on Tuesday.

“Democrats and Republicans in the House and the Senate enthusiastically support this legislation,” Pelosi said. “We stand with … all who are fighting for a peaceful, hopeful future.”

Leaders of the House Foreign Affairs Committee said the committee was due to mark up – debate and vote on – the bill next week. It is expected to pass, which would send it for a vote by the full House.

A spokeswoman for the Senate Foreign Relations Committee said that committee was also working on its version of the legislation, hoping to hold its markup next week.

The bill’s text will not be final until it passes both houses of Congress, and it must be signed by President Donald Trump to become law.

The current version of the House bill calls for annual evaluations of whether Hong Kong still meets the conditions – including remaining autonomous – of the 1992 U.S. law granting it special economic status.

It also would require the Trump administration to identify and sanction anyone responsible for human rights abuses in Hong Kong, Republican Representative Chris Smith, one of the bill’s lead sponsors, told the news conference.

Trump has sent some mixed signals on the Hong Kong protests. In early August, he caused alarm among those sympathetic to the movement by describing the street demonstrations as riots.

Trump has since called on China to end the discord in a humanitarian way and said a crackdown could make his efforts to end a damaging trade war “very hard.”

Some industry groups worry that the legislation could threat then delicate trade talks. Backers rejected that concern.

“We cannot let commercial interests drive our policy,” Pelosi said.

(Reporting by Patricia Zengerle; Editing by Tom Brown)

Size matters. Big U.S. farms get even bigger amid China trade war

By Mark Weinraub

HAZELTON, N.D. (Reuters) – As the 2018 harvest approached, North Dakota farmer Mike Appert had a problem – too many soybeans and nowhere to put them. Selling was a bad option. Prices were near-decade lows as U.S. President Donald Trump’s trade war with China weighed heavily on the market. Temporary storage would only buy him a little bit of time, particularly in an area where cold weather can damage crops stored in plastic bags.

So Appert, who farms 48,000 acres (19,425 hectares), cut a check for $800,000 to build eight new permanent steel bins. That allowed him to hold onto his bumper crop and wait for prices to recover.

He sold half of the 456,000 bushels stored on his farm throughout the following summer, earning about $1 more per bushel and avoiding storage at nearby CHS elevators or an Archer Daniels Midland Co. processor in the area.

But most farmers do not have $800,000 to spend on steel bins, and many are going under. The number of U.S. farms fell by 12,800 to 2.029 million in 2018, the smallest ever, as the trade war pushes more farmers into retirement or bankruptcy.

Roger Hadley, who farms 1,000 acres in Indiana, was unable to plant any corn and soybeans this year after heavy rains added to farmers’ woes.

He spent most of the summer trying to plant a combination of grasses, a so-called cover crop, so he could apply for government aid and try again next year.

“The guys that got rich are getting richer,” Hadley said. “It has frustrated a lot of guys.”

In farming, size does matter. The farms left standing after the trade war will likely be some of the biggest in the business. Appert’s operations are more than 100 times bigger than the average American farm and the advantages provided by that magnitude are becoming even more critical as the trade war stretches into a second year.

The declining number of U.S. farmers could hurt the world’s top grain merchants such as ADM and Bunge, who will have fewer suppliers. Additionally, farmers will have less need to rent space in the merchants’ grain silos as big farmers like Appert have plentiful storage on their own farms.

ADM said it would continue changing to meet the needs of its customers. Bunge did not respond to an email seeking comment.

By the end of 2018, the average U.S. farm size rose to 443 acres, a 12-year high and up from 441 million in 2017, according to the latest U.S. Department of Agriculture data.

And the biggest farmers are growing their operations even more as retiring farmers choose to lease their land rather than selling it.

When land becomes available for lease, only the biggest farmers can readily shoulder the costs needed to expand.

The size of the loans smaller farmers would need to buy equipment, for example, are too big for applicants with little collateral, said Dave Kusler, president of the Bank of Hazelton in Hazelton, North Dakota.

“It is almost impossible with what the costs are,” Kuslersaid. “In this area, you can’t make a living on 1,000 acres.”

Critics say the Trump administration’s policy of compensating growers for lost sales due to the trade war pays the bigger farm operations more since payments are calculated by acres farmed.

The Environmental Working Group, a conservation organization, said in a recent study the top 1% of aid recipients received an average of more than $180,000 while the bottom 80% were paid less than $5,000 in aid.

Appert said that big farmers receive bigger outright payments but less per acre than small farms because of a $500,000 cap per farm.

‘BOOM, BOOM, BOOM’

Big farms can reap the full benefits of new high-tech equipment that boosts farm yields.

Doug Zink, who farms 35,000 acres near Carrington, North Dakota, said he likes to trade in his fleet of four combines and planters nearly every year to ensure that his equipment is under warranty, which saves thousands of dollars in maintenance costs and helps avoid breakdowns during key seeding and planting periods.

They also receive deep discounts – as much as $40,000 for some combine harvesters that can cost as much as $400,000 – allowing them to upgrade more often.

Manufacturers are increasingly willing to cut such deals to keep clients as the number of customers falls. Deere & Co <DE.N> said that it will reduce production by 20% at its facilities in Illinois and Iowa in the second of half of the year. Rival agricultural machine makers AGCO Corp <AGCO.N> and CNH Industrial <CNHI.N> have also slashed production to keep inventory in line with retail demand.

Large farms also have the easiest access to capital, with bankers still eager to provide loans to growers with plenty of collateral. “The ag trend is going to larger farms,” Kusler, the bank president in Hazelton, North Dakota, said, “The loans get much larger.”

Appert had no problem getting a loan to finance expansion.

“If you want to get a mortgage and buy a piece of land it is just boom, boom, boom,” he said.

(Reporting by Mark Weinraub; Editing by Caroline Stauffer and Marguerita Choy)

Trump favors ‘whole deal’ with China, two sides prepare for trade talks

By Jeff Mason and Chris Prentice

WASHINGTON (Reuters) – President Donald Trump said on Thursday he preferred a comprehensive trade deal with China but did not rule out the possibility of an interim pact, even as he said an “easy” agreement would not be possible.

“I’d rather get the whole deal done,” Trump told reporters at the White House. “I see a lot of analysts are saying an interim deal, meaning we’ll do pieces of it, the easy ones first. But there’s no easy or hard. There’s a deal or there’s not a deal. But it’s something we would consider, I guess.”

The president’s remarks came as the world’s two largest economies prepare for new rounds of talks aimed at curbing a more-than-year-long trade war that has hurt global economic growth and rattled financial markets.

The two sides have been making conciliatory gestures ahead of the talks, lowering the temperature between them and cheering investors.

China renewed purchases of U.S. farm goods, which the United States welcomed, and Trump delayed a tariff increase on certain Chinese goods by two weeks in honor, he said, of Chinese President Xi Jinping.

Lower-level U.S. and Chinese officials are expected to meet next week in Washington ahead of talks between senior trade negotiators in early October. Top-level negotiators last met face-to-face in China in July.

Washington is pressing China to end practices it considers unfair, including intellectual property theft, industrial subsidies, currency manipulation, and forced technology transfer from U.S. companies to Chinese counterparts.

Trump has made clear he wants such elements to be part of a deal and has demonstrated his resolve through tariff increases, even when they dented gains in the stock market.

Meeting U.S. demands would require structural change in China, which so far it has been unwilling to make. The two sides came close to a deal in May, but Chinese officials balked at requirements that Chinese laws be altered as part of the deal.

ECONOMIC IMPACT

The trade war is affecting the global economy. The International Monetary Fund on Thursday forecast that U.S. and Chinese tit-for-tat tariffs could reduce global GDP in 2020 by 0.8% and trigger more losses afterward.

Still, global stocks rose on Thursday after the conciliatory gestures from both sides.

China importers bought at least 10 cargoes, or 600,000 tonnes, of U.S. soybeans for October-December shipment, the country’s most significant purchases since at least June, U.S. traders with direct knowledge of the deals said.

That came after Trump on Wednesday announced his delay in the increase in tariffs on some Chinese goods by two weeks and China exempted some U.S. drugs and other goods from tariffs.

While welcoming China’s overtures, U.S. Treasury Secretary Steven Mnuchin sought to temper optimism in markets that the gestures might lead to a trade deal. He told CNBC that Trump was prepared to keep or even raise tariffs on Chinese imports and that Beijing had asked for more concessions beyond the removal of tariffs.

“The next month is important,” Mnuchin said at a later event hosted by the New York Times. “We’re hopeful we’ll make progress. If we can get the right deal, we’ll do a deal.”

NO CHANGE ‘ON THE FUNDAMENTALS’

The Wall Street Journal reported that China was seeking to narrow the scope of negotiations to trade matters by excluding national security issues. National security issues have not, however, been a key topic in the trade talks so far.

The soybean purchases sent benchmark prices of the commodity, of which China is the top buyer, soaring. They were the largest by private Chinese importers since Beijing raised import tariffs on the U.S. oilseed by 25% in July 2018 in retaliation for U.S. duties on Chinese goods. Duties were raised an additional 5% this month.

U.S. farmers, a core component of Trump’s political base, have been among the hardest hit by the tariff battle that began more than a year ago and has escalated in recent weeks.

Earlier in the day in Beijing, Commerce Ministry spokesman Gao Feng said Chinese firms have started to inquire about prices for U.S. farm goods. He also said that China welcomed the U.S. delay to its scheduled tariff hike on billions of dollars worth of Chinese goods.

“(China) hopes both sides would continue to meet each other half way and adopt concrete actions to create favorable conditions for negotiations,” Gao told a briefing, noting that possible purchases included pork and soybeans, both of which are still subject to hefty Chinese duties.

China has bought U.S. pork despite tariffs of 62% in place since last year because huge numbers of pigs have been culled across the country as Beijing struggles to contain an outbreak of African swine fever. The world’s biggest pork consumer has hiked imports to make up the shortfall.

China said it would reduce purchases of U.S. farm products in August after Trump vowed to impose new tariffs on around $300 billion of Chinese goods.

On Wednesday Trump announced a delay in increasing tariffs on $250 billion worth of Chinese imports to Oct. 15 from Oct. 1. The tariffs on those goods were set to increase to 30% from 25%.

Earlier that day China announced it was exempting 16 types of U.S. products from tariffs, including some anti-cancer drugs and lubricants, as well as animal feed ingredients whey and fish meal.

William Reinsch, a former senior U.S. Commerce Department official, said the goodwill gestures should help, but big hurdles remained.

“Both sides are trying to find a way out of the box,” he said. “Short term, that’s good. But I don’t think anything’s changed on the fundamentals, and once they get back to the table, they’ll discover that.”

(Additional reporting by Stella Qiu, Ben Blanchard, Michael Martina, and Dominique Patton in Beijing, and Andrea Shalal in Washington; Editing by Sandra Maler)

U.S., China grant trade concessions as fresh talks loom

By Jeff Mason and Yawen Chen

WASHINGTON/BEIJING (Reuters) – U.S. President Donald Trump on Wednesday welcomed China’s decision to exempt some U.S. anti-cancer drugs and other goods from its tariffs and announced a short delay to scheduled tariff hikes on billions worth of Chinese goods.

Stock markets in Asia rose on the news in early Thursday trade, as the concessions came days ahead of a planned meeting aimed at defusing the escalating trade war between the world’s two largest economies.

China’s decision to exempt some U.S. goods was a “big move” by Beijing and a positive gesture before trade negotiators from both countries meet in Washington, Trump told reporters at the White House.

China on Wednesday announced its first batch of tariff exemptions for 16 types of U.S. products, including some anti-cancer drugs and lubricants, as well as animal feed ingredients whey and fish meal, according to a Ministry of Finance statement on its website.

“They made a couple of moves … that were pretty good,” Trump said at an unrelated event on vaping. “I think it was a gesture, okay? But it was a big move.”

On Wednesday, Trump wrote in a post on Twitter that the United States had agreed to delay increasing tariffs on $250 billion worth of Chinese imports from Oct. 1 to Oct. 15 “as a gesture of goodwill.” The tariffs were set to increase to 30% from 25% on the goods.

Trump said he hoped to reach a trade agreement with China following more than a year of tit-for-tat exchanges of tariffs that have roiled global markets.

“I deal with them and I know them and I like them,” he said. “I hope we can do something.”

Asian stocks rose on Thursday, while China’s yuan currency was also up 0.27 percent in offshore trade, as investors hoped for a thaw in U.S.-China trade frictions.

Deputy trade negotiators are due to meet in Washington in mid-September, with minister-level talks to follow in October. Exact dates for the meetings have not been released.

The gestures may ease tensions ahead of the negotiations, but some analysts don’t see it as a signal that both sides are readying a deal.

“The exemption could be seen as a gesture of sincerity towards the U.S. ahead of negotiations in October but is probably more a means of supporting the economy,” ING’s Greater China economist Iris Pang wrote in a note.

“There are still many uncertainties in the coming trade talks. An exemption list of just 16 items will not change China’s stance,” she said.

Indeed, the exempted list pales in comparison to over 5,000 types of U.S. products that are already subject to China’s additional tariffs. Moreover, major U.S. imports, such as soybeans and pork, are still subject to hefty additional duties, as China has ramped up imports from Brazil and other supplying countries.

Beijing has said it would work on exempting some U.S. products from tariffs if they are not easily substituted from elsewhere. The United States is by far China’s largest supplier of whey, which is an important ingredient in piglet feed and difficult to source in large volumes from elsewhere.

Analysts say that with its duties on soybeans and U.S.-made cars, China is taking aim at a key political support base of Trump, mainly the factories and farms across the Midwest and South at a time of receding momentum in the world’s top economy.

China has imposed several rounds of duties on U.S. goods in retaliation against U.S. Section 301 tariffs, beginning last year in July and August with a 25% levy on about $50 billion of U.S. imports.

In all, the United States and China have slapped tariffs on hundreds of billions of dollars worth of goods in a bitter trade war that has raised the specter of a global recession, with further tariffs slated to take effect in coming months.

The items on the two tariff exemption lists – posted on the ministry’s website – will not be subject to additional duties imposed by China on U.S. goods “as countermeasures to U.S. Section 301 measures,” the ministry said in its statement.

The exemption will take effect on Sept. 17 and be valid for a year through to Sept. 16, 2020, it said. Beijing said in May that it would start a waiver program, amid growing worries over the cost of the protracted trade war on its already slowing economy.

ING’s Pang noted the United States had also exempted imports of 110 Chinese products from tariffs in July, including high-value items such as medical equipment and parts.

TALKS

Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are expected to meet in early October in the U.S. capital, but key officials are tamping down expectations for a major accord.

For two years, the Trump administration has sought to pressure China to make sweeping changes to its policies on intellectual property protection, forced transfers of technology to Chinese firms, industrial subsidies and market access.

Beijing and Washington were close to a deal last spring but U.S. officials said China backed away from an agreed text over a reluctance to change laws to address U.S. complaints.

The South China Morning Post reported, citing an unidentified source, that China was expected to buy more agricultural products in hopes of a better trade deal with the United States.

Senior White House adviser Peter Navarro this week urged investors, businesses and the public to be patient about the trade dispute.

Earlier on Wednesday, a survey by a prominent American business association showed the trade dispute was souring the profit and investment outlook for U.S. companies operating in the world’s second-biggest economy.

(Reporting by Se Young Lee, Judy Hua, Dominique Patton, Yawen Chen, Huizhong Wu and Ben Blanchard in Beijing and Jeff Mason in Washington; Additional reporting by Makini Brice and Doina Chiacu; Writing by Yawen Chen and Andrea Shalal; Editing by Sam Holmes & Shri Navaratnam)

U.S. wants ‘near term’ results from new China trade talks: Kudlow

FILE PHOTO: White House chief economic adviser Larry Kudlow talks with reporters on the driveway outside the West Wing of the White House in Washington, U.S. August 2, 2019. REUTERS/Carlos Barria

By David Lawder and Makini Brice

WASHINGTON (Reuters) – The Trump administration wants to see “near term results” from U.S.-China trade talks in September and October, White House economic adviser Larry Kudlow said on Friday, but he declined to predict any outcomes or say if U.S. tariff delays were possible.

Speaking on CNBC and Bloomberg TV, Kudlow confirmed that the top U.S. and Chinese trade negotiators would meet in early October but added that a date had not been set.

The plans for the first in-person U.S.-China trade meetings since late July were set during a phone call on Thursday between Chinese Vice Premier Liu He, U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin. Trade deputies are due to meet in mid-September.

The 14-month U.S.-China trade war has escalated sharply since May when talks broke down after Beijing backtracked on earlier commitments to make changes in law to improve intellectual property protections, curb the forced transfer of U.S. technology to Chinese firms and improve U.S. access to Chinese markets.

Since then, U.S. President Donald Trump has sharply increased existing tariffs on $200 billion worth of Chinese goods and imposed or scheduled new tariffs on virtually all remaining imports from China to increase his negotiating leverage.

Kudlow told Bloomberg TV that he could not speculate on whether the September or October talks could delay a planned tariff increase on Oct. 1 to 30% from 25% on $250 billion worth of Chinese goods.

“Our team would like to go back and pick up where we left off in the May talks. Whether that will be possible remains to be seen,” Kudlow said.

He said Trump has shown willingness to use tariffs as part of the negotiating process.

“We want to see results. We would like to see results in the near term. When we don’t see results, we take additional actions,” Kudlow said. “On the other hand, if we do see results from these upcoming meetings, then progress will be made.”

Kudlow also said there were no preconditions for the October talks.

Trump later said on Twitter that China was hurting economically from the U.S. tariffs but that the new round of talks were positive.

“‘China is eating the Tariffs,'” Trump tweeted. “Billions pouring into USA. Targeted Patriot Farmers getting massive Dollars from the incoming Tariffs! Good Jobs Numbers, No Inflation(Fed). China having worst year in decades. Talks happening, good for all!”

(Reporting by Susan Heavey, Tim Ahmann and David Lawder; Writing by David Lawder and Makini Brice; Editing by Jonathan Oatis and Steve Orlofsky)

China, U.S. to hold trade talks in October; Beijing says phone call went well

FILE PHOTO: Chinese and U.S. flags flutter near The Bund, before U.S. trade delegation meet their Chinese counterparts for talks in Shanghai, China July 30, 2019. REUTERS/Aly Song/File Photo/File Photo

BEIJING (Reuters) – China and the United States on Thursday agreed to hold high-level trade talks in early October in Washington, amid fears that an escalating trade war could trigger a global economic recession.

The talks were agreed to in a phone call between Chinese Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin, China’s commerce ministry said in a statement on its website. China’s central bank governor Yi Gang was also on the call.

“Both sides agreed that they should work together and take practical actions to create good conditions for consultations,” the ministry said.

“Lead negotiators from both sides had a really good phone call this morning,” ministry spokesman Gao Feng said in a weekly briefing. “We’ll strive to achieve substantial progress during the 13th Sino-U.S. high-level negotiations in early October.”

Gao also said Beijing opposes any escalation in the trade war.

Trade teams from the two countries will hold talks in mid-September before the high-level talks next month, the ministry said.

A spokesman for the U.S. Trade Representative’s office confirmed that Lighthizer and Mnuchin spoke with Liu and said they agreed to hold ministerial-level trade talks in Washington “in the coming weeks”.

News of the early October talks lifted most Asian share markets on Thursday, raising hopes these can de-escalate the U.S.-China trade war before it inflicts further damage on the global economy.

On Sunday, Washington began imposing 15% tariffs on an array of Chinese imports, while China began placing duties on U.S. crude oil. China said on Monday it had lodged a complaint against the United States at the World Trade Organization.

The United States plans to increase the tariff rate to 30% from the 25% duty already in place on $250 billion worth of Chinese imports from Oct. 1.

U.S. President Donald Trump had warned on Tuesday he would be tougher on Beijing in a second term if trade talks dragged on, compounding market fears that disputes between the United States and China could trigger a U.S. recession.

Chinese leaders will have a packed schedule next month, gearing up for National Day celebrations scheduled for Oct. 1.

They will also hold a key meeting in October to discuss improving governance and “perfecting” the country’s socialist system, state media has said.

(Reporting by Kevin Yao, Yawen Chen and Beijing Monitoring Desk; Editing by Paul Tait and Richard Borsuk)

China hopes U.S. will create conditions necessary for September trade talks

FILE PHOTO: U.S. dollar and China yuan notes are seen in this picture illustration June 2, 2017. REUTERS/Thomas White/Illustration/File Photo

BEIJING (Reuters) – China and the United States are discussing the next round of face-to-face trade talks scheduled in September, but hopes for progress hinge on whether Washington can create favorable conditions, China’s commerce ministry said on Thursday.

In the latest tit-for-tat escalation of the trade war between the world’s two largest economies, U.S. President Donald Trump last Friday said he would heap an additional duty of 5% on about $550 billion in targeted Chinese goods.

The move came hours after China had unveiled retaliatory tariffs on $75-billion worth of U.S. goods.

China hopes the United States can cancel the planned additional tariffs to avoid an escalation in the trade war, its commerce ministry spokesman, Gao Feng, told reporters on Thursday.

“The most important thing at the moment is to create necessary conditions for both sides to continue negotiations,” he said during a weekly briefing, adding that China was lodging “solemn representation” with the United States.

For two years, the Trump administration has sought to pressure China to eliminate what it calls unfair trade practices and make sweeping changes to its policies on intellectual property protection, forced transfers of technology to Chinese firms, industrial subsidies and market access.

But China has constantly denied such accusations, vowing to fight back in kind and criticizing U.S. measures as protectionist.

Gao said China had “ample” countermeasures to retaliate against the planned U.S. tariffs, but talks in the current circumstances should focus on whether the tariffs could be canceled.

He did not answer directly when asked if his remarks suggested China would not retaliate against the latest U.S. tariff threat.

China has repeatedly said it would have no choice but to retaliate if the United States followed through on its threat.

On Monday, Trump predicted a trade deal with China, saying he believed it was sincere about wanting to reach a deal, citing what he called increasing economic pressure on Beijing and job losses there.

Trump cited as a positive sign comments by Vice Premier Liu He, who has been leading the talks with Washington, that China was willing to resolve the dispute through “calm” negotiations.

He repeated his assertion that Chinese officials had contacted U.S. trade counterparts overnight, offering to resume negotiations, a statement that China declined to confirm.

Gao also declined to provide any detail when asked if there had been a call this week between Beijing and Washington.

“As far as I know, both trade teams have maintained effective communication,” he said.

In July 2018, the U.S.-China trade dispute boiled over in tariffs on hundreds of billions of dollars’ worth of each other’s goods and threatens to engulf all trade between the countries, putting global growth at risk.

“We hope the United States will show sincerity and concrete actions,” Gao said.

(Reporting by Stella Qiu and Se Young Lee; Writing by Yawen Chen; Editing by Simon Cameron-Moore and Clarence Fernandez)

U.S. warship sails in disputed South China Sea amid trade tensions

FILE PHOTO: The U.S. Navy Arleigh Burke-class guided-missile destroyer USS Wayne E. Meyer sails alongside South Korean multirole guided-missile destroyer Wang Geon during a bilateral exercise in the western Pacific Ocean April 25, 2017. U.S. Navy/Mass Communication Specialist 3rd Class Kelsey L. Adams/Handout via REUTERS

By Idrees Ali

WASHINGTON (Reuters) – A U.S. Navy destroyer sailed near islands claimed by China in the South China Sea on Wednesday, the U.S. military said, a move likely to anger Beijing at a time of rising tensions between the world’s two largest economies.

The busy waterway is one of a growing number of flashpoints in the U.S.-Chinese relationship, which include an escalating trade war, American sanctions on China’s military and U.S. relations with Taiwan. Reuters reported on Tuesday that China had denied a request for a U.S. Navy warship to visit the Chinese port city of Qingdao.

The U.S. Navy vessel Wayne E. Meyer, an Arleigh Burke-class guided-missile destroyer, carried out the operation, traveling within 12 nautical miles (14 miles/22 km) of Fiery Cross and Mischief Reefs, Commander Reann Mommsen, a spokeswoman for the Japan-based U.S. Navy’s Seventh Fleet, told Reuters.

The operation was conducted “to challenge excessive maritime claims and preserve access to the waterways as governed by international law,” Mommsen added.

The U.S. military operation comes amid an increasingly bitter trade war between China and the United States that sharply escalated on Friday, with both sides leveling more tariffs on each other’s exports.

The U.S. military has a long-standing position that its operations are carried out worldwide, including areas claimed by allies, and are separate from political considerations.

China and the United States have traded barbs in the past over what Washington has said is Beijing’s militarization of the South China Sea by building military installations on artificial islands and reefs.

China’s claims in the South China Sea, through which about $5 trillion in ship-borne trade passes each year, are contested by Brunei, Malaysia, the Philippines, Taiwan and Vietnam.

China has called its construction as necessary for self-defense and has said the United States is responsible for ratcheting up tensions by sending warships and military planes close to islands that Beijing claims.

China’s 2019 defense spending will rise 7.5 percent from 2018, according to a budget report. Its military build-up has raised concerns among neighbors and Western allies, particularly with China becoming more assertive in territorial disputes in the East and South China Seas and over Taiwan, a self-ruled territory Beijing claims as its own.

The U.S. military last year put countering China, along with Russia, at the center of a new national defense strategy, shifting priorities after more than a decade and a half of focusing on the fight against Islamist militants.

In addition, Vice President Mike Pence, in a visit to Iceland next week, will have talks about “incursions” into the Arctic Circle by China and Russia, a senior Trump administration official said on Wednesday.

(Reporting by Idrees Ali; Editing by Chizu Nomiyama and Will Dunham)

China strikes back at U.S. with new tariffs on $75 billion in goods

FILE PHOTO: A U.S. flag on an embassy car is seen outside a hotel near a construction site in Shanghai, China, July 31, 2019. REUTERS/Aly Song

By Se Young Lee and Judy Hua

BEIJING (Reuters) – China said on Friday it will impose retaliatory tariffs against about $75 billion worth of U.S. goods, putting as much as an extra 10% on top of existing rates in the dispute between the world’s top two economies.

The latest salvo from China comes after the United States unveiled tariffs on an additional $300 billion worth of Chinese goods, including consumer electronics, scheduled to go into effect in two stages on Sept. 1 and Dec. 15.

China will impose additional tariffs of 5% or 10% on a total of 5,078 products originating from the United States including agricultural products such as soybeans, crude oil and small aircraft. China is also reinstituting tariffs on cars and auto parts originating from the United States.

“China’s decision to implement additional tariffs was forced by the U.S.’s unilateralism and protectionism,” China’s Commerce Ministry said in a statement, adding that its retaliatory tariffs would also take effect in two stages on Sept. 1 and Dec. 15.

The White House and U.S. Trade Representative’s office did not immediately respond to Reuters’ request for comment on China’s latest tariffs.

Though Chinese and U.S. trade negotiators held another discussion earlier in August, neither side appears ready to make a significant compromise and there have been no sign of a near-term truce.

The protracted dispute has stoked fears about a global recession, shaking investor confidence and prompting central banks around the world to ease policy in recent months. U.S. stocks fell on Friday on the news of China’s tariffs, underscoring growth concerns.

In an interview on CNBC, Federal Reserve Bank of Cleveland President Loretta Mester said she viewed the Chinese retaliatory tariffs as “just a continuation” of the aggravated trade policy uncertainty that has begun weighing on American business investment and sentiment.

AGRICULTURE, AUTO SECTORS HIT

The knock-on effects of the U.S.-China trade dispute was a key reason behind the Fed’s move to cut interest rates last month for the first time in more than a decade.

“It is unclear as things stand whether the U.S.-China trade negotiations will continue as planned in early September,” said Agathe Demarais, global forecasting director at The Economist Intelligence Unit, in an e-mail statement.

“All eyes will now turn to the U.S. Fed to see whether Jerome Powell, the Fed Chairman, will react to these developments by accelerating rate cuts.”

Among U.S. goods targeted by Beijing’s latest tariffs were as soybeans, which will be hit with an extra 5% tariff starting Sept. 1. China will also tag beef and pork from the United States with an extra 10% tariff.

China is also reinstituting an additional 25% tariff on U.S.-made vehicles and 5% tariffs on auto parts that had been suspended at the beginning of the year. Carmakers such as Daimler <DAIGn.DE> and Tesla <TSLA.O> had adjusted their prices in China when the auto and auto parts tariffs had been suspended.

Ford <F.N>, a net exporter to China, said in a statement it encouraged the United States and China to find a near term solution.

“It is essential for these two important economies to work together to advance balanced and fair trade,” the company said.

White House trade adviser Peter Navarro told Fox Business News that trade negotiations with China would still go on behind closed doors.

(Reporting by Judy Hua, Min Zhang, Se Young Lee, Stella Qiu, Hallie Gu and Dominique Patton in BEIJING, Yilei Sun in SHANGHAI, Doina Chiacu and David Shepardson in WASHINGTON; Editing by Alison Williams)

On the front lines: Trade war sinks North Dakota soybean farmers

Paul and Vanessa Kummer check the soybeans on their farm near Colfax, North Dakota, U.S., August 6, 2019. REUTERS/Dan Koeck

By Karl Plume

COLFAX, North Dakota (Reuters) – North Dakota bet bigger on Chinese soybean demand than any other U.S. state.

The industry here – on the far northwestern edge of the U.S. farm belt, close to Pacific ports – spent millions on grain storage and rail-loading infrastructure while boosting plantings by five-fold in 20 years.

Now, as the world’s top soybean importer shuns the U.S. market for a second growing season, Dakota farmers are reeling from the loss of the customer they spent two decades cultivating.

The state’s experience underscores the uneven impact of the U.S.-China trade war across the United States. Although China’s tariffs target many heartland states that, like North Dakota, supported President Donald Trump’s 2016 election, those further south and east are better able to shift surplus soybeans to other markets such as Mexico and Europe. They also have more processing plants to produce soymeal, along with larger livestock and poultry industries to consume it.

For North Dakota, losing China – the buyer of about 70% of the state’s soybeans – has destroyed a staple source of income. Agriculture is North Dakota’s largest industry, surpassing energy and representing about 25% of its economy.

“North Dakota has probably taken a bigger hit than anybody else from the trade situation with China,” said Jim Sutter, CEO of the U.S. Soybean Export Council.

In its second-quarter agricultural credit conditions survey this month, the Federal Reserve Bank of Minneapolis said 74% of respondents in North Dakota reported lower net farm income.

China shut the door to all U.S. agricultural purchases on Aug. 5 after Trump intensified the conflict with threats to impose additional tariffs on $300 billion in Chinese imports, some as soon as Sept. 1.

Some farmers were relying on the Trump administration’s $28 billion in farm aid payments to compensate them for trade war losses, only to be disappointed with new payment rates for counties in North Dakota.

The rates are below those for some southern states that rely much less on exports to China. The U.S. Department of Agriculture determined other states had a higher “level of exposure” to tariffs than North Dakota because they also grow other crops, such as cotton and sorghum, that were hit by Chinese tariffs, according to a brief written statement from the USDA in response to questions from Reuters.

With record soy supplies still in storage and another crop to be harvested soon, farmers in the U.S. soybean state with the best access to ports serving China are unable to sell their crops at a profit.

Rail shippers would normally send more than 90 percent of the North Dakota soybeans they buy to Pacific Northwest export terminals. Now they are trying unsuccessfully to make up the shortfall by hauling corn, wheat and other crops with limited demand. Some are moving soybeans south and east to domestic users, a costlier endeavor that ultimately thins margins for both shippers and farmers.

LOST DEMAND

Soy farmers who planted this spring – when the White House was talking up a nearly finished trade deal with China – watched as those trade talks collapsed in May, sending prices well below their costs of production.

Vanessa Kummer checks the quality of their 2018 soybean crops on the family farm near Colfax, North Dakota, U.S., August 6, 2019. REUTERS/Dan Koeck

Vanessa Kummer checks the quality of their 2018 soybean crops on the family farm near Colfax, North Dakota, U.S., August 6, 2019. REUTERS/Dan KoeckVanessa Kummer’s farm in Colfax, North Dakota, has yet to sell a single soybean from the fall harvest because of the low prices. Normally, the farm would have forward-sold 50% to 75% of the upcoming harvest.

 

Vanessa Kummer’s farm in Colfax, North Dakota, has yet to sell a single soybean from the fall harvest because of the low prices. Normally, the farm would have forward-sold 50% to 75% of the upcoming harvest

She fears the U.S.-China soy trade is now “permanently damaged” as China shifts its purchases to Brazil, uses less soy in animal feed and consumes less pork as African swine fever kills of millions of the nation’s pigs.

“It will take years to get back to any semblance of what we had over in China,” Kummer said, standing in a sparse field of ankle-high soy plants, where two weeks earlier she hosted a delegation of soy importers from Ecuador and Peru.

Though it is the No. 4 soy state overall, North Dakota is home to two of the top three U.S. soy producing counties in the nation.

Options for North Dakota farmers are limited. U.S. wheat has been losing export market share for years. Demand for specialty crops such as peas and lentils, which grow well in the northern U.S., has been dampened by retaliatory tariffs imposed by India, a major importer of both products.

ROOTS OF DEPENDENCE

North Dakota’s farmers never set out to become so dependent on a single buyer of one crop. But with wheat profits shrinking and Chinese demand for soy growing, soybeans increasingly seemed like the obvious choice.

Companies including Berkshire Hathaway’s BNSF expanded rail capacity to open up a West Coast shipping corridor, and Pacific Northwest seaports expanded to handle more exports to China. Seed companies offered North Dakota farmers new varieties that allowed soybeans to thrive in the state’s colder climate and shorter growing season.

A $200 million crop two decades ago blossomed into a $2 billion crop, topping the value of wheat, once North Dakota’s top crop.

The number of high-speed shuttle train loading terminals in North Dakota tripled from about 20 in 2007 to more than 60 currently, according to industry data, with investments totaling at least $800 million.

But one of those facilities, CHS Dakota Plains Ag elevator in Kindred, North Dakota, has gone three or four months without loading a soybean train this year, said Doug Lingen, a grain merchant there. Normally the elevator would load at least one train a month with beans bound for the Pacific Northwest.

LIMPING ALONG

The drop in demand has soybean prices in North Dakota trading at a historic discount to U.S. futures prices, and farmers are putting investments on hold.

Justin Sherlock, who grows corn, soybeans and other crops near Dazey, North Dakota, had been planning to buy a used grain drier this year for around $100,000 to $150,000, passing on a new one that would be at least $350,000.

But an uncertain future has now shelved those plans, even with the latest promise for government aid. According to rates published last month, farmers in Sherlock’s county can apply for aid of $55 per acre, well below the maximum $150 rate offered in 22 counties nationwide.

Sherlock called the latest announcement “disappointing.”

“I’m just going to defer all my investment,” he said, “and try to limp along for a few years.”

(Reporting by Karl Plume in Chicago, additional reporting by P.J. Huffstutter; Editing by Caroline Stauffer and Brian Thevenot)