China tariff war would hit ag producers in the pocket book
April 5, 2018
While White House officials continue to downplay the possibility of a potential trade war between the United States and China, agriculture associations are weighing in with their concerns.
"We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a trade deficit of $500 billion a year, with intellectual property theft of another $300 billion. We cannot let this continue!" President Donald Trump tweeted on April 4.
But that coincided with threats from China to impose $50 billion in tariffs on 106 U.S. products, including soybeans, beef, whiskey and cars. China's retaliation was in response to Trump's plans to place a 25 percent tariff on about 1,300 products in response to Beijing's alleged theft of U.S. intellectual property. While both sides continue to posture, producers are watching the situation closely, as a number of agriculture products are on China's tariff list.
Agriculture Secretary Sonny Perdue said on April 3 that he felt confident that President Trump would not allow farmers "to bear the brunt" of a trade war with China.
"The good thing is that farmers are patriots," he said at Michigan State University. "They understand that if people aren't playing by the rules, action has to be taken, but they don't want to be the only sacrificial lambs in this trade war."
Perdue told ProFarmer's Jim Wiesemeyer that the administration may come up with a plan to compensate farmers who are harmed by the tariffs, but did not elaborate any further.
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In the meantime, ag groups continue to speak out against the possibility of a trade war with one of their largest customers.
"It is unsettling to see American-produced beef listed as a target for retaliation," said Kent Bacus, National Cattlemens Beef Association's director of international trade and market access. "Sadly, we are not surprised, as this is an inevitable outcome of any trade war. This is a battle between two governments, and the unfortunate casualties will be America's cattlemen and women and our consumers in China."
The Trump Administration has until the end of May to resolve this issue, and with states like Nebraska, holding the title for the largest beef exporter in the U.S., concern may be warranted, despite the fact that beef exports to China just reopened last June.
"China already assesses a 12 percent tariff on beef imports from the U.S. and most other suppliers. They are now proposing an additional 25 percent on top of that, bringing the total to 37 percent. Tariff rates are lower for New Zealand and Australian beef, because those countries have free trade agreements with China," said Max Moncaster, NCBA associate director, policy communications.
Another problem with a potential trade war is how other countries respond, according to Jess Peterson, with the United States Cattlemen's Association.
"This could be detrimental to U.S. beef exports and domestic cattle prices could decline creating a negative setting for the U.S. cattle industry," Peterson said.
U.S. soybeans are also on the list to take a 25 percent tariff hit from China, and the American Soybean Association is asking the White House to reconsider its retaliation. China purchases 61 percent of the total U.S. soybean exports, and more than 30 percent of overall U.S. soybean production.
"It should surprise no one that China immediately retaliated against our most important exports, including soybeans. We have been warning the administration and members of Congress that this would happen since the prospect for tariffs was raised," ASA President and Iowa farmer John Heisdorffer said. "That unfortunately doesn't lend any comfort to the hundreds of thousands of soybean farmers who will be affected by these tariffs. This is no longer a hypothetical, and a 25 percent tariff on U.S. soybeans into China will have a devastating effect on every soybean farmer in America."
Soybean futures have already taken a turn in the markets, coming in 40 cents lower on April 4.
"At a projected 2018 crop of 4.3 billion bushels, soybean farmers lost $1.72 billion in value for our crop (April 4) alone. That's real money lost for farmers, and it is entirely preventable," Heisdorffer said.
Corn growers also have a bone to pick with the potential trade war, despite making the top 10 list for China exports. While corn is primarily used for livestock feed in the Midwest, there is a connection.
"There are no winners in a trade war, only casualties. As trade tensions continue to mount with China, the expanded list of tariffs on food and agriculture exports are making America's farmers the first casualties," said Texas farmer Wesley Spurlock, chairman of the National Corn Growers Association.
"Our corn farmers have worked for decades to support fair and open trade practices because we understand that trade is a two-way street. In today's global economy, we know that we need to be competitive to grow and maintain our market share. Our farmers have done that, which is why agriculture has a positive trade balance. In 2018, the U.S. is forecast to export $139.5 billion in agricultural goods to the 95 percent of consumers who live outside the U.S. Instead of new protectionist policies, our nation's focus should be on growing market access and promoting expanded trade from our most competitive industries."
While strong domestic anti-trust and anti-dumping laws ensure healthy competition, communication between the industry and the Trump Administration is the key, and is lacking according to some in the agriculture industry.
"Any action that affects the cattle industry should involve producer input," USCA's Peterson said. "In order to ensure a stable, strong and vibrant U.S. cattle industry the Trump administration needs to create a more direct line of communication with cattle country to ensure there is better dialogue and understanding on these issues and the ramifications."
While the administration continues the trade war tit-for-tat discussions, following the battle over China's policies on intellectual property and information technology, ag questions remain unanswered and producers are hoping that Trump can chose a less destructive plan.
"We still have not heard a response from the administration to our March 12 letter requesting to meet with President Trump and discuss how the administration can work with soybean farmers and others in agriculture to find ways to reduce our trade deficit by increasing competitiveness rather than erecting barriers to foreign markets," Heisdorffer said. "But there is still time to reverse this damage, and the administration can still deliver for farmers by withdrawing the tariffs that caused this retaliation. China has said that its 25 percent tariff will only go into effect based on the course of action the administration takes."
Pork, also on the list, represents a major part of the $100 billion American livestock industry. Since China was the world's second-largest buyer of U.S. pork by volume between 2008 and 2017, behind only Mexico, pork producers are seeing red also.
In a statement, National Pork Producers Council CEO Neil Dierks said the organization is "disappointed" in the tariff and is "hopeful" that it "will be short-lived."
The World Trade Organization is ultimately saddled with the task of curbing a trade war, but WTO officials seem to be simply sitting on the sidelines to date.
"A trade war is in no one's interests. The WTO will be watching the situation very closely," the WTO's director general, Roberto Azevedo, said in early March after Trump announced his tariff plan.
On a good note, there is nothing set in stone, as of yet. "The best news is China and the U.S. are talking," said Kim Reddin, communications director for the Colorado Corn Growers Association.
But the Chinese foreign ministry spokesman Geng Shuang called for a little more dialogue from the Washington side. "…the U.S. has missed the opportunity time and time again," he said.
Keeping the communication open is important from all ends.
"We do have a window of opportunity to reach a mutually beneficial trade position with China until the time that tariffs are fully implemented. We need to be measured, professional and business-like in our approach to keeping the trade doors open with China. Equally important, we need the president to understand the implications that these trade actions have for America's farm families," Spurlock said.
"We believe in trade enforcement, but endless retaliation is not a good path forward for either side," Bacus added.
— Eatherton is a freelance writer from Beulah, Wyo. When she's not writing, she's riding her horse or playing with her grandson. She can be reached at firstname.lastname@example.org.