Vulnerable U.S. Agriculture ‘On the Tip of the Spear’ Amid China’s Retaliatory Tariff Threats04/06/2018
Amid escalating trade tensions between the United States and China, newly proposed tariffs announced Wednesday sparked fresh market volatility and nervous anticipation across whole swaths of the U.S. economy.
Across Missouri — and in much of the American heartland — anxiety is especially high among farmers, who fear they stand to bear the brunt of the retaliatory tariffs proposed by China, after President Donald Trump’s initial moves to curb key Chinese imports, like steel.
“It’s an awful day for Missouri agriculture,” said Blake Hurst, president of the Missouri Farm Bureau, who expressed particular concern about China’s proposed tariffs on soybeans, pork and cotton. “Three really important products to Missouri are no longer competitive in the Chinese market if these go into place.”
China looms large as a market for those and other American agricultural commodities — a fact especially illustrated by soybeans, which recently ended corn’s decades-long reign as the U.S.’ most widely planted crop. As a primary feed for livestock, China buys 61 percent of exported American soybeans and more than 30 percent of U.S. soy overall, according to the St. Louis-based American Soybean Association.
That consumption amounted to more than $12 billion in business in 2017, according to the U.S. Department of Agriculture — making China the largest foreign market of soy by a factor of nearly 10 over Mexico, the next biggest buyer. But tariffs may cause China’s soybean imports from the U.S. to drop by more than 70 percent, according to a study from Purdue University released last week.
China’s dominant influence also plays out across a wide range of other crop types and farm products, confronting Missouri with plenty to lose among its more than $3.6 billion of agricultural exports from 2016, the last year for which the USDA has available data.
Hurst is hopeful the state’s farmers will still find foreign markets for their products if China’s tariffs set in, but worries that they won’t be able to command the same prices.
“It won’t mean a drop in overall exports. It will mean a drop in price,” he said.
Even more could be at stake across the Mississippi River. Illinois is the country’s largest producer of soybeans and fourth-largest source of pork, according to the USDA. The latest agency numbers show that the state has the third-highest value of agricultural exports, totaling more than $8.3 billion in 2016.
Ron Moore, a farmer in Roseville, Ill., and chairman of the American Soybean Association, is painfully aware of his own dependence on trade with China, and worries that the tariffs could be “devastating” for his operation.
“The vast majority of my soybeans go down the Mississippi River to the Gulf of Mexico and to the export market,” he said.
Whether tied to soy, corn, meat or other products subject to tariffs, he says ripple effects would reverberate throughout rural America — a cruel fate, he points out, given the overwhelming rural support for Trump in the 2016 election.
“It doesn’t seem like he’s listening to the people that helped get him elected as much as we would like him to,” Moore said. “When agriculture becomes successful, rural America becomes successful.”
For some congressional Republicans who supported Trump’s initial steel tariffs last month, Wednesday’s news could turn what had been a winning political hand into a losing one.
Rep. Mike Bost, R-Ill., for example, was an early and enthusiastic backer of the steel tariffs because of major steel production in his district, which includes parts of the Metro East. That support appeared to have paid off politically for him last month, when a shuttered Illinois steel plant was restarted in the wake of the steel tariff announcement. Bost at the time called it a “big victory.”
But even more important to Bost’s region than steel is agriculture. In recent comments to the St. Louis AgriBusiness Club, Bost — who is being heavily targeted by Democrats in November — reassured nervous farm interests that the steel tariffs he supported were unlikely to lead to retaliatory agriculture tariffs from China. He called such fear a “knee-jerk reaction.”
Bost spokesman George O’Connor noted in a statement Wednesday to the Post-Dispatch that China’s soybean tariff isn’t specifically in response to the U.S. steel tariffs, but to the more recent U.S. tariff announcement involving intellectual property. “It is Rep. Bost’s hope that the United States and China can come to an agreement that will be beneficial to our Southern Illinois farmers,” O’Connor said in the statement.
Concerns come true
After warning Trump to back off his decision to impose tariffs on steel and aluminum over a month ago, Sen. Roy Blunt, R-Mo., said his concerns came true Wednesday.
Speaking with reporters during a stop at the Missouri Capitol, Blunt said his fears of retaliation had been borne out over the prior 48 hours after China announced it was imposing taxes on a variety of U.S. products in response to Trump’s decision to ratchet up talk of more tariffs.
“I think the last two days are an indication of exactly what I’ve been most concerned about,” Blunt said. “I don’t think we’re headed to the right place on trade policy.”
Blunt, a member of the Senate leadership team, raised red flags about Trump’s move to impose tariffs on steel and aluminum when the action was announced in late February. Since then, trade tensions have escalated.
“I’ve been concerned both publicly and in the Oval Office with the president. A trade war always has unanticipated consequences and is harder to get out of than it is to get into,” Blunt said.
Blunt said he was hopeful negotiations could avert a full-fledged trade war.
Under terms of the U.S. announcement, the latest round of tariffs wouldn’t kick in until after a public comment period and hearings set to happen in mid-May.
Blunt said one potential solution is more vigorous enforcement of World Trade Organization actions already pending against China on dumping.
Steve Censky, the deputy secretary of the USDA, addressed the hostile tariff situation when speaking to reporters at an agricultural conference in St. Louis, Tuesday.
“Unfortunately, U.S. agriculture, at many times, is on the tip of the spear when it comes to retaliation,” Censky acknowledged. “We’re going to be working to try to minimize that.”
He did not elaborate, though, on what specific strategies might be employed to cushion the blow.
“Right now those are some contingency plans that we’re taking a look at,” Censky said.
For now, farmers are left hoping that the tariffs won’t come to fruition, wishing some last-ditch advocacy to elected officials and the White House can ensure that rural America’s economy isn’t a casualty of a political trade war.
“The only bright thing I can say about this is it’s not a done deal,” Moore said.
“Like it or not, we are a global market,” he adds. “We have to have export markets to continue to grow the rural economy and to continue to grow rural America.”
Source: Bryce Gray, Kevin McDermott and Kurt Erickson, St. Louis Post-Dispatch