U.S. Growers, Ag Industry In Crosshairs Of Trump Trade War

soybean-harvest photo

By Lynda Bryant-Work


“As we learned after President Herbert Hoover signed the Smoot-Hawley tariff at the outset of the Great Depression, vibrant international trade is a key component to economic recovery; hindering trade is a recipe for disaster.”

Asa Hutchinson

 

Farmers across the United States expect to lose billions of dollars this year if the Trump trade war with China and other countries continues to escalate.

The trade war comes at a tough time for farmers when prices for soybeans and corn have been stubbornly low. A February USDA report showed that net U.S. farm income has been steadily declining since 2013. The department projects that this year’s net farm income will hit its lowest level in inflation-adjusted terms since 2002.

Farmers who have already been hit by higher costs due to the Trump steel tariffs are also being hit by a market problem as countries look to other nations for supply sources – and are finding them.

As predicted in June, China responded to Trump’s tariffs on $50 billion worth of goods. The duties imposed on Chinese steel and aluminum caused Beijing to retaliate with sweeping tariffs of its own, and American agriculture is a big target, with a 25 percent tax on American pork and fruit, and a Soybean Market15 percent tax on apples and almonds.

The food and agriculture industries have been dreading the Trump tariff’s repercussions for a while — pricier aluminum could destroy 20,000 beer jobs alone, but the Chinese counterblow is particularly unwelcome for American farmers, given the already historic-low prices for their products.

According to Grant Kimberley, director of market development for the Iowa Soybean Association, there are big issues with trade dealings, but he says the stakes are high and farmers don’t want to be the pawn.

What are the stakes?

China buys approximately 30 percent of all American soy beans and the Trump’s tariff of 25 percent will ensure that China buyers will look elsewhere.

According to a Purdue University study, exports of soy to China would drop 65 percent under the tariff, destroying many farmers in the wake, and that is a major disaster said agricultural economics experts.

With fall harvest time nearing, the price of American soy will fall sharply, and farmers could lose more than $3 billion in the first year. In Iowa alone, farmers are predicted to lose $624 million.

FTA growth for Ag
Trump’s tariffs threaten the growth that took place from 1990 to 2016 under the Free Trade Agreement, completely reversing the continued exports by U.S. farmers.

While some farmers say they have weathered markets going up and down, concern is there is no way to prepare for a trade war and retaliation on such a large scale losing so much money on every acre of soybeans.

John Heisdorffer, an Iowa farmer and president of the American Soybean Association, said he worries for young farmers with less money put aside for emergencies and he also fears the farmers who rent land will not earn enough to pay their leases.

“There will be farmers who lose their rentals, he said.

Those farmers who stay in business will do what they can to prepare by putting off buying new farm equipment and tractors (already affected by steel and aluminum tariffs), and buy less fertilizer, but there are few other areas to cut costs.

International Soy markets will be hit

According to the Purdue study, with less demand for soy, production in the U.S. will probably drop 15 percent and farmers will seek other crops to grow, while the soy production in countries like Brazil will skyrocket to fill China’s demand.

Countries like Brazil benefiting from the tariff war will be able to increase infrastructure and expand other crops, creating unforeseen impacts in the future to U.S. trade.

But the tariffs don’t just affect soy farmers. U.S. farmers shipped the Chinese almost $20 billion worth of food in 2017, and China is technically the third-biggest market (over $1 billion a year) for pork.

Pig farmers are bracing for the second round of hefty retaliatory pork tariffs from China and Mexico and predict they will lose big money. China is scheduled July 6 to start collecting an additional 25 percent tariff on imported U.S. pork, which when added with the previous import taxes will mean a tax exceeding 70 percent, essentially slamming the door shut on U.S. pork imports. One in four hogs raised in the U.S. is sold overseas and China is the world’s top consumer of pork.

Pigs and Tariffs photo
Pig farmers across the U.S. stand to lose big sales in exports due to Trump’s tariffs, with some large companies considering investing in overseas opertions.

Producers have been expanding the pork industry in recent years in expectation of export opportunities, according to Ken Maschhoff, chairman of the Maschhoff Family Foods and co-owner of the nation’s largest family-owned pork producer. However, the threat of a trade war is adding uncertainty and driving fear.

Maschhoff said the company has put a halt on all investment, not just because it will lose money, but because,we don’t know if growing in the U.S. is the right move if we won’t be an exporting country.”

Maschhoff said the farm industry has been “asked to be good patriots. We have been. But I don’t want to be the patriot who dies at the end of the war. If we go out of business, it’s tough to look at my kids and the 550 farm families that look us into the eye and our 1,400 employees.”

Iowa is the top pork producer in the U.S., and already there are estimates that 10 percent of the state’s farms will probably fail in the coming year. Workers have begun comparing the situation to the 1980s farm crisis, the industry’s worst period since the Great Depression.

Trump’s tariffs haven’t thrilled a lot of farmworkers in the state and the Iowa Soybean Association attacked them as an “immediate and grave threat” to the industry, arguing, “No winners emerge from a trade war and that’s particularly true when it involves food and nutrition.”

Rep. Steve King (R-IA) expressed worries of escalating Chinese tariffs on American exports during an interview with Breitbart News Tonight, recalling Jimmy Carter’s 1980 grain embargo against the Soviet Union, saying the tariffs could hurt farmers. His concerns are reflected across the agricultural community.

“I had my opinions going into this, and I’ve been traveling all over the northwest particular part of Iowa and meeting with manufacturers and agricultural producers and equipment dealers and community leaders and we’re all of the same mind, that we remember what happened when Jimmy Carter embargoed the grain exports to the Soviet Union, said King.US Brazil soybean production

“He launched that on January 4, 1980, and that was just the fourth day of the new decade, and that entire decade turned into a farm crisis decade, and I turned into the congressman that has actually been burned and buried more family farm building sites than anybody else in the United States Congress. I lived through that in the hardest way, and we’ve still got scars from that decade.”

Trump who ran a platform of “saving” America’s farms, yet keeps comes up with policy and tariffs making it increasingly bleak for farmers. Besides the tariffs, little has been done to help declining crop prices and is heightening worries.

Trump policies disrupting the economy of his voting base

In that context, Trump’s trade war looks bad very bad for farmers. Pressure from farm country has helped pull Trump from the brink of trade bellicosity in the past, when last April, Trump was poised to rip up the North America Free Trade Agreement (NAFTA), which has led to a boom in U.S. farm exports to Mexico and Canada, the Wall Street Journal reported at the time.

At that time, USDA secretary Sonny Perdue “showed him a map indicating the states where jobs would be lost if the pact collapse – many were farm and border states that voted heavily for Trump.” In the end, Trump opted to renegotiate NAFTA rather than destroy it outright, though his imposed tariffs are doing much damage.

In a survey of 750 farmers and ranchers conducted Feb. 26-March, the trade journal Agri-Pulse reported that 67 percent of respondents said they voted for Trump in 2016—but just 45 percent said they would support him again in 2020.

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