US-China Phase I trade deal to boost US cotton exports

The National Cotton Council (NCC) has announced that the Phase 1 trade deal with China, recently signed by President Donald Trump, could provide a much-needed boost to US cotton exports. The Phase 1 agreement includes a chapter on agriculture with Chinese purchases of US products intended to reach at least $40 billion per year starting in 2020.

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However, the overall impact for cotton remains uncertain as commodity-specific details have not been released, according to a press release by NCC.

“While we welcome Phase I and are hopeful about the potential for future increased sales to China, US 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,” NCC chairman Mike Tate, an Alabama cotton producer said.

Tate was referring to the administration’s $16 billion trade assistance package through the market facilitation programme to help mitigate China’s retaliatory tariffs. According to him, this assistance, administered by USDA, has been very timely with US 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 2019 and the second tranche in November 2019.

“Since the middle of 2018, the ongoing trade dispute between the US and China has been front and centre in any discussion of the cotton market. Cotton prices remain well below pre-dispute levels due to China’s imposition of a 25 per cent retaliatory tariff. That’s why removal of these tariffs should be a high priority for any upcoming dialogue between the two countries,” Tate said.