By RACHEL LANE

D.C. Correspondent

WASHINGTON, D.C. — An agreement with Japan was announced Sunday, just days after the Chinese government and President Donald Trump announced more tariffs.

If approved, the agreement with Japan would lower tariffs on U.S. agricultural product imports, while the United States would lower tariffs on the Japanese automotive industry. The market is a large destination for U.S. agriculture, but the implementation of the new Trans-Pacific Partnership (CPTPP) in December 2018 worried industry experts, since the countries in the agreement would get lower tariffs while the U.S. continued to pay higher rates.

Japan accounts for about one-quarter of U.S. beef and pork exports each year.

“We look forward to rapid implementation of the agreement, as international competitors are currently taking U.S. pork market share through more favorable access," said David Herring, president of the National Pork Producers Council.

About $1.6 billion in pork was exported to Japan in 2018. Over the next 15 years, that is expected to grow to $2.2 billion, said Dermot Hayes, an economist at Iowa State University. About 25 percent of all U.S. pork is exported.

Jennifer Houston, president of the National Cattlemen’s Beef Assoc., said last year, more than $2 billion in U.S. beef was exported to Japan. Right now, there is a 38.5 percent tariff on it.

The announcement was made the same day Trump said he did not have plans to force U.S. businesses out of China, but could do it using a 1977 act.

Earlier in the month, Trump announced increased tariffs on China beginning Sept. 1; China retaliated by announcing it would purchase no U.S. ag products. It also manipulated the value of their currency, allowing China to export products more cheaply.

Trump then announced he would wait to implement some of the tariffs until December, after stores had the stock needed for holiday shopping.

Last Friday, China announced its increased tariffs. Trump responded via Twitter, trying to order U.S. companies to stop doing business with China. Later in the day, he announced increases on existing tariffs from 25 to 30 percent; the scheduled September tariffs will increase from 10 to 15 percent.

The announcements correlated with fluctuations in the U.S. stock market, dropping with negative news and rising in the middle of the month.

Shawn Hackett, president of Hackett Financial Advisors, said historically the U.S. stock market and agriculture have an inverse relationship. When stock markets are doing well, the U.S. has a strong dollar, and ag exports suffer because U.S. goods are more expensive.

When the stock market starts to do poorly, the Federal Reserve will often cut interest rates and the value of the dollar will decline.

American Farm Bureau Federation President Zippy Duvall said the announcement that China would not buy any ag products is a blow. Thousands of U.S. farmers and ranchers are already struggling.

In 2017, farmers sold $19.5 billion in commodities to China. Last year, China was a $9.1 billion market. Duvall said the first half of 2019 already showed sales to that country were down $1.3 billion.

“In the last 18 months alone, farm and ranch families have dealt with plunging commodity prices, awful weather, and tariffs higher than we have seen in decades,” he said. “We urge negotiators to redouble their efforts to arrive at an agreement, and quickly.”

He is grateful for Market Facilitation Program payments for farmers, but the aid cannot last forever, and, “Exports ensure farmers will continue to supply safe, healthful, and affordable food for families here and around the world.”

Hackett said China not ordering U.S. ag commodities is possible, but not sustainable this year. Chinese pig populations have been decimated by African swine fever, and bad weather has decreased production of other commodities within the country as well.

China can import ag products from other countries, but avoiding the U.S. will increase costs for its consumers, he explained. The currency manipulation was put in place to make Chinese-manufactured goods cheaper and easier to export. It has the drawback, though, of increasing the cost of all imports, including food.

Eventually, he said the Chinese people will object. There will be protests and maybe riots in mainland China, and these will be a sign to the Chinese government that it needs to readjust its trade retaliation tactics.

The U.S. can sell to other countries, Hackett said. He doesn’t think diversifying where the U.S. sells is a bad thing. Right now, he believes China needs the U.S., but the U.S. also needs China as a market.

“We never should have been selling 60 percent of (soybeans) to one customer … If we start selling to a larger number of markets, it’s better for us,” he said, adding that diversifying trade to multiple countries takes time. So, farmers are worried.

Trump thinks the best way to get reelected is to stay tough on China, while China thinks the best way to get someone else elected is to not make a deal, Hackett said. He doesn’t think either country can afford to wait until the 2020 election to make a deal.

In other trade news, at the beginning of the month, the U.S. Trade Representative (USTR) announced the European Union had agreed to import more U.S. beef. Non-tariff barriers, like restrictions on imports of chlorine-washed chicken, have been blamed for the low imports of U.S. products into the EU.

Over the next seven years, the agreement will increase the 18,500 metric tons of beef to 35,000. The USTR estimates this will mean an increase in annual sales from $150 million to $420 million.

“America’s ranchers welcome the opportunity to supply a bigger share of Europe’s beef market,” Duvall said. “While this is certainly good news, it’s important for U.S. negotiators to remain committed to reaching a broad trade agreement with the EU that levels the playing field for all farmers and ranchers.”