American farmers want trade partners not handouts
The Trump administration plans to give American farmers and ranchers hurt by the current trade war $12 billion in emergency relief to mitigate the impact of tariffs on their exports.
While this may lessen the blow of an already struggling agricultural economy in the short run, it is only a Band-Aid. As an agricultural economist, I know that no one really wins in a trade war. As someone who grew up on a cotton and alfalfa farm in rural Arizona, I know firsthand that producers want access to markets — not government handouts.
If the trade conflict with China continues much longer, it will likely leave lasting scars on the entire agricultural sector
as well as the overall U.S. economy. A tit-for-tat trade war
How did we get here? In January, the Trump administration placed tariffs on Chinese solar panels and washing machines to protect U.S. manufacturers. It followed that in March with tariffs on all imports of steel and aluminum — citing national security concerns. Though many countries were subsequently exempted from the U.S. import tariffs on steel and aluminum, China was the primary target.
China responded by imposing tariffs on U.S. exports worth $3 billion in April as countermeasures to U.S. tariffs. Another round of U.S. duties on Chinese products prompted additional retaliation from China in July on $34 billion worth of U.S. goods, furthering a tit-for-tat trade conflict with no end in sight.
China is the second-largest export market for U.S. agriculture behind Canada, which means it’s no surprise that such goods made up the vast majority of the more than 600 products that have been targeted by China with tariffs of 15 percent to 25 percent in two rounds of retaliation. Among them are cotton, wheat, dairy, wine, fruits, nuts, soybeans and pork — to name just a few. Caught in the crossfire Since China’s tariffs only recently took effect and more retaliation could happen, it’s still too early to fully understand the potential damage. But U.S. farmers and ranchers are bracing for the worst.
For example, China is the world’s largest consumer of soybeans, gobbling up about 65 percent of all trade of the commodity. The Chinese bought more than $12 billion in American soybeans in 2017, or 57 percent of all U.S. exports of the crop.
Thanks to the 25 percent tariff on U.S. soybeans, Chinese importers have been canceling contracts with American farmers for later in the year and buying more from Brazil, which is expected soon to be the world’s top soybean producer.
A recent study suggests that if the tariffs stay in place, U.S. exports of soybeans could fall 24 percent to 34 percent, while production could decline 11 percent to 15 percent.
The extent of the impact depends on whether U.S. soybean farmers are able to find new markets for their crops. In addition, because China consumes so many soybeans — which it primarily uses for livestock feed — it probably can’t cut out U.S. producers entirely. Chinese importers will simply have to pay more for U.S.-sourced soybeans to meet domestic demand.
The pork industry, which was already subject to tariffs before the trade war began, has been especially hard hit. After successive rounds of tariffs, U.S. pork is now subject to Chinese duties of as high as 70 percent.