The Chinese government has approved several domestic companies to buy U.S. cotton, corn, sorghum and pork without being subject to hefty retaliatory tariffs, according to people familiar with the situation.
Some textile mills have been given permission to purchase a total of 50,000 tons of U.S. cotton without paying the 25% retaliatory duty, the people said. A number of companies will also be exempt from the tariffs on American pork, corn and sorghum, the people said, without specifying the volume.
The move follows the approval of some 3 million tons of U.S. soybeans for purchase with tariff waivers, according to people familiar with the situation earlier this week.
There could be a second round of exemptions depending on how the trade talks progress, they said. China’s commerce ministry didn’t respond to a fax seeking comment.
U.S. Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin are set to travel to China July 29 for the first high-level, face-to-face trade negotiations between the world’s two biggest economies since talks broke down in May.
In a press conference July 25 in Beijing, China’s commerce ministry spokesman said companies are willing to buy U.S. farm products in line with domestic demand and their purchases are made on their own decisions. There is no direct connection between purchases and the resumption of trade talks, ministry spokesman Gao Feng said.
Even with the tariffs in place, the U.S. sold about 64,000 tons of cotton in May, according to Chinese customs data. Meanwhile, American exports of corn, sorghum and pork have slumped since the beginning of the trade war. China imported more than 620,000 tons of U.S. sorghum in April 2018, before imports fell to almost nothing this year.
Cotton for December delivery rose as much as 0.6% on ICE Futures U.S. July 25 in New York, and traded up 0.2% as of 4:25 p.m. Beijing time on July 26. Meanwhile, shares of cotton producers in China slumped, with Xinjiang Talimu Agriculture Development Co. tumbling as much as 4.8% while Xinjiang Sailimu Modern Agriculture Co. fell 1.6%.