Farm­ers fear Trump trade war squeeze

Grow­ers in the corn belt agree Nafta needs fix­ing but fore­see lost mar­kets

The Guardian Weekly - - Finance - Do­minic Rushe

It’s been a long, strange sum­mer for Amer­ica’s corn belt. The weather has been per­fect. Farm­ers are ex­pect­ing a record soy­bean crop. But at the world’s largest farm show in Boone, Iowa, last week the talk was of where they will sell it, tar­iffs and Twit­ter.

For months Amer­ica’s farm­ers have been “at the spear point” of an in­ter­na­tional trade dis­pute started by the Trump ad­min­is­tra­tion, says Davie Stephens, a Ken­tucky farmer and vice-pres­i­dent of the Amer­i­can Soy­bean As­so­ci­a­tion. Last week there were signs of a break­through as Canada and Mex­ico got closer to cut­ting a deal with the US.

Even be­fore he started run­ning for of­fice, Don­ald Trump railed against Nafta – the 25-year-old North Amer­i­can Free Trade Agree­ment that guides trade re­la­tions be­tween the US, Canada and Mex­ico – call­ing it “the worst trade deal ever”. While farm­ers at Farm Progress have their is­sues with it and many voted for Trump, what they re­ally want is cer­tainty. Corn, and soy, doesn’t grow in a day. Sadly, for them, cer­tainty is not a Trumpian trait.

Stephens is hopeful about the ten­ta­tive deal with Mex­ico, and is im­pressed with Trump’s team. “The hope is that we are closer to a res­o­lu­tion. They can call it Nafta or what­ever, doesn’t mat­ter to us,” he said.

Stephens’s sen­ti­ment was echoed across the 32 hectares of Farm Progress, which ended last Thurs­day. Chat­ting be­side the 600-plus ex­hibits of farm­ing equip­ment – the site is punc­tu­ated by colos­sal spiky har­vesters and other ma­chines that look more suited to space ex­plo­ration than food pro­duc­tion – farm­ers seem cau­tiously op­ti­mistic Trump has their back.

It helps that the Depart­ment of Agri­cul­ture has drawn up a $12bn aid pack­age for farm­ers to help off­set losses from re­tal­ia­tory tar­iffs on Amer­i­can ex­ports. But “trade, not aid” is what most farm­ers say they want. And they want a deal now. Har­vest­ing has be­gun in parts of the coun­try. Soon seed sellers will be call­ing and farm­ers will have to start plan­ning how much – and what – they will grow next year. Com­mod­ity prices have col­lapsed, thanks to the tar­iffs and over­sup­ply. Loans need to be rene­go­ti­ated. Farm­ing is a slow busi­ness and plan­ning is ev­ery­thing. Dis­quiet now could soon be­come some­thing closer to panic if a deal isn’t done. “We need a deal sooner rather than later. A deal that will be good for ev­ery­body,” says Rich Sch­we­men, a lo­cal crop con­sul­tant.

Iowa farm­ers alone are fac­ing a $2bn loss from tar­iffs, so last Mon­day’s an­nounce­ment that the US had reached a ten­ta­tive agree­ment to re­solve its dif­fer­ences with Mex­ico was a big deal. But last Fri­day Chrys­tia Free­land, Canada’s for­eign min­is­ter, who had cut short a trip to Europe this week to try to bro­ker a deal with the US, said talks had hit an im­passe, and Trump con­tin­ued to threaten to kill Nafta and go it alone with Mex­ico.

That threat may be blus­ter. Canada is the largest market for US ex­ports and Nafta has al­lowed the three coun­tries to work in uni­son in in­dus­tries, par­tic­u­larly auto man­u­fac­ture, that will suf­fer might­ily if a three-way pact is not agreed. Even if Trump does get a deal, it is not yet clear whether it will have to go through Congress or if Congress would ap­prove it.

The tar­iffs have been ter­ri­ble for busi­ness, says Den­nis Slater, pres­i­dent of the As­so­ci­a­tion of Equip­ment Man­u­fac­tur­ers (AEM), and the con­se­quences are spread­ing far be­yond farm­ing. Trump’s steel tar­iffs, which started the dis­putes, added 10%-20% to the cost of man­u­fac­tur- ing the huge ma­chines bak­ing in the Iowa sun. Given that those ma­chines can cost $500,000 and up, that’s a lot of money. “Even if we used Amer­i­can steel, prices are still up,” he says. “The econ­omy has been strong, there’s no sup­ply, ev­ery­one upped their prices.”

About 1.3 mil­lion peo­ple are em­ployed by AEM mem­bers, 350,000 in mak­ing agri­cul­tural equip­ment. The losses farm­ers face will hit the en­tire man­u­fac­tur­ing sec­tor and peo­ple who rely on them. “If you lose your job to­mor­row, you’re not buy­ing another car,” says Slater. “There’s no dis­pute Nafta needs up­dat­ing and we need a bet­ter deal with China,” he says. But the in­dus­try needs cer­tainty, or “Amer­i­cans are go­ing to get laid off ”.

Day one of Farm Progress ended early as thun­der­storms turned the site into a slick, black mud­bath and or­gan­is­ers asked vis­i­tors to go home. The next day the sun was out again and with it came Sonny Per­due, Trump’s avun­cu­lar sec­re­tary of agri­cul­ture. In a soft­ball ques­tion-and-an­swer ses­sion he praised farm­ers (“they em­body that great Amer­i­can spirit, risk tak­ing, en­trepreneur­ship, hard work, the val­ues of faith and fam­ily that are in­spir­ing to me wher­ever I go”) while skirt­ing around the hard ques­tions.

He ac­knowl­edged that farm­ers have told him they want trade, not aid. But the mar­kets are un­fair to ex­porters. Trump said “enough is enough. We are go­ing to have free trade and fair trade,” said Per­due.

Many farm­ers at the show worry that Brazil and other South Amer­i­can sup­pli­ers could step in and per­ma­nently erode their mar­kets in China and else­where as the dis­pute con­tin­ues. A third of US soy ends up in China at present and those “un­fair” trade prac­tices – and China’s boom­ing econ­omy – have al­lowed soy­bean ex­ports to grow from $400m in 1997 to $14bn in 2017. Per­due said he doesn’t be­lieve the dis­pute has done ir­repara­ble dam­age long term. But he did con­cede that it could take “a lit­tle while to get those mar­kets back”.

One farmer who didn’t want to be named (“I don’t want to get into a Twit­ter war”) said he was scep­ti­cal and worse news could soon come. “What’s the plan? Piss off our big­gest trade part­ners? Shout at them? I don’t know that’s the best way to get things done. To­day things look bet­ter but who knows what’s go­ing to hap­pen to­mor­row. We could get screwed by some 6am tweet.”

In­ter­na­tional vis­i­tors were less bullish too. Lu Tan, who works for corn pro­ducer Dekalb in China’s Hu­nan prov­ince, had trav­elled 30 hours to see the show. (“A lot of China’s farm­ing is small­hold­ers. We’d need smaller ma­chines,” he ob­served.) The trade dis­pute isn’t good for any­one, he said. A Cana­dian vis­i­tor, who wanted to re­main anony­mous for fear of los­ing cus­tomers, was more blunt. “Trump is a men­ace. You can’t trust a word he says. Sure there are things that need sort­ing out, but who says he’ll keep his word? The guy’s a liar.”

But if farm­ers blame any­one, it’s Wash­ing­ton, not Trump. The other big topic at Farm Progress was the farm bill. The mas­sive bill that cov­ers agri­cul­tural and food pro­grammes is rene­go­ti­ated ev­ery five years and ex­pires at the end of Septem­ber. It is al­ways a po­lit­i­cal hot potato and now more than ever, adding another layer of worry for al­ready fret­ful farm­ers.

‘Things look bet­ter, but who knows? We could get screwed by a 6am tweet’

John Richard

A dis­play at Iowa’s Farm Progress show. Tar­iffs have al­ready pushed ma­chin­ery prices up by 10-20%

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