(Bloomberg) — Wheat hit the highest in almost three months as traders considered China’s cautious approach to US tariffs, and the market awaited details on possible talks between the leaders of the world’s two biggest economies.
It comes as a fresh trade war simmers between Washington and Beijing, expectations of which have roiled grains markets over the past week. But China’s retaliatory tariffs, announced on Tuesday in response to the US’ opening move, are being viewed as measured and a sign that Beijing is trying to avoid a worst-case scenario of a severe escalation, according to analysis by Bloomberg Economics.
“China’s restrained response and a generally friendly tone in state media and social media ahead of the US deadline suggest an effort to create backdrop that’s conducive for talks,” the report said. It added it’s possible that US tariffs don’t end up as high as the 60% level Trump threatened on the campaign trail.
In the previous session, grains including wheat rose after Beijing imposed tariffs on US energy and agricultural equipment but left out crops, just moments after Trump’s 10% levy on Chinese goods came into effect, paring some initial losses. On Monday, Trump said he expected to speak with China “within 24 hours,” but he’s since hinted the talks may be postponed.
Still, worries linger that Sino-US trade tensions could entangle agriculture products like soybeans. In China, soybean meal prices rallied on Wednesday, the first day of market opening after the Lunar New Year holiday.
“Even though agricultural products are not targeted in Beijing’s countermeasures, the market is still quite worried over the uncertainty of future Sino-US relations,” said Rosa Wang, an analyst with Shanghai JC Intelligence Co. Ltd., a China-based commodities consultancy.
Meanwhile, Trump’s month-long delay on 25% tariffs on Canada and Mexico has also added relief to grain markets. A retreat in the dollar is also improving the competitiveness of American grains, according to a note from CRM Agri.
