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Ag groups balking at tariff trade escalation with China

WASHINGTON, D.C. — Commodity groups and agriculture-related organizations are warning of serious consequences for farmers if the trade spat between the United States and China continues.

Tariffs enacted or proposed by both countries could have a huge impact, even if the dispute between them doesn’t last long, said Brian Kuehl, executive director of Farmers for Free Trade.

“U.S. agriculture has developed relationships and opened sales pipelines with China,” he noted. “China is our No. 1 trade partner, and here we’re poking them in the eye. If you lose a market, it can take a long time to get it back, if you can get it back at all.

“If I were other countries, I’d be salivating. If I were Brazil, I’d be saying, ‘Yes, let’s have a trade war.’”

In recent weeks, the U.S. and China have traded announcements regarding tariffs. In early March, President Donald Trump said the United States would impose tariffs on steel and aluminum imports. Some countries, including Canada and Mexico, were temporarily exempted from the tariffs.

On April 2, the Chinese government imposed tariffs worth about $3 billion on 128 U.S. goods, including pork, fruits and nuts. The next day, Trump announced $50 billion in tariffs on about 1,300 Chinese industrial, medical and aerospace products.

On April 4, China countered again by proposing tariffs on 106 U.S. products, including soybeans, corn, wheat and beef – also worth $50 billion.

On April 5, Trump asked U.S. Trade Representative Robert Lighthizer to consider enacting $100 billion in additional tariffs on China. He also instructed USDA Secretary Sonny Perdue to “use his broad authority to implement a plan to protect our farmers and agricultural interests.”

In response, a spokesperson for China’s Ministry of Commerce said, “China has made its position very clear. We don’t want a trade war, but we are not afraid of such a war.” China will take “comprehensive countermeasures” if the United States continues its “protectionist practices,” the spokesperson said.

Meanwhile, Reuters reported over the weekend that the USDA confirmed sales of 458,000 metric tons of U.S. soybeans to “undisclosed locations.” Traders and grain analysts said those purchasing the soybeans included European Union soybean processors such as the Netherlands and Germany, according to the news agency.

It’s not surprising agricultural products have been targeted by China, Kuehl said. In looking at past trade disputes, agriculture usually takes a hit. Twenty percent of the nation’s farm revenue comes from exports, he said.

“A lot of farmers in the Midwest have been counting on soybeans; they saw them as the one bright light,” he explained. “They were planting or have planted soybeans, made purchases of seed. Then, lo and behold, we get into a trade war. That’s real consequences.

“U.S. agriculture isn’t a minor industry. There are more than just jobs at stake. Communities are at stake. You’re going to have farmers going out of business. That can ripple to the local diner, to equipment dealers, to grain elevators. We know how this is going to play out. If you whack them, they’re going to whack us.”

In the first couple of days after last week’s tariff announcements, the commodity market reaction was extremely negative, said Nick Leblebijian, principal partner with Lakefront Futures & Options, LLC.

“The stock market was very shaky, and that can affect outside markets such as commodities,” he explained. “This is extreme and it will continue. In the short term, this will be horrible for agriculture. But in the long term, I think it will be wonderful for the economy.

“When all is said and done, I promise there will be an agreement beneficial to the United States.”

Farmers Leblebijian has talked with are unsure if commodity prices will allow them to make money. Some analysts have predicted, as a result of proposed tariffs, prices for corn could fall to $3 and soybeans, $8 per bushel.

“Their main focus is to make sure they have income,” he said. “They don’t want to get into trouble and they don’t want to lose their farms. They need to turn a profit.”

Uncertainty abounds

There’s a great deal of uncertainty regarding the tariffs and their impact, said David L. Ortega, assistant professor in Michigan State University’s Department of Agricultural, Food and Resource Economics.

“Even if the dispute gets resolved quickly, the market doesn’t like uncertainty,” he said. “A lot of effort has gone into opening up China’s market to U.S. farmers. We’ve made significant progress to open it to pork trade and, last year, China opened up the beef market after a long embargo. The tariffs could definitely have a huge, dramatic effect on the farm economy.”

The tariffs also impact producer decisions, Ortega said. “I’d definitely be thinking twice if I were a farmer. This is where that uncertainty affects a lot of the market. It’s a waiting game now – let’s see what’s going to happen. Right now, farmers are just concerned with profitability and how to make it in this economy.”

The American Soybean Assoc. has asked the White House to reconsider the tariffs. “It should surprise no one that China immediately retaliated against our most important exports, including soybeans,” said John Heisdorffer, its president.

“We have been warning the administration and members of Congress that this would happen since the prospect for tariffs was raised. That unfortunately doesn’t lend any comfort to the hundreds of thousands of soybean farmers who will be affected by these tariffs.”

America’s farmers are the “first casualties” in the trade dispute between the countries, said Wesley Spurlock, chair of the National Corn Growers Assoc.

“Our corn farmers have worked for decades to support fair and open trade practices because we understand that trade is a two-way street,” he explained. “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.”

The Trump administration can support rural Americans by working with the Chinese to avoid tariffs, said Jimmie Musick, president of the National Assoc. of Wheat Growers. “America’s wheat farmers are experiencing several hardships, and adding a 25 percent tariff on exports to China for U.S. wheat is the last thing we need during some of the worst economic times in farm country.

“Continued drought, low prices and trade uncertainty add pressure to passing a farm bill on time, as well as creating uncertainty for producers and lenders. In a trade war, agriculture is always the first target,” Musick said.