Iowa city’s bond with China feels taxed

MU SCAT I NE, IOWA» This spring, residents of this Mississippi River city published a book celebrating three decades of friendship with Chinese President Xi Jinping, who first visited as a regional official in 1985 to learn about modern farming practices.

That visit, and one Xi made in 2012, helped forge a relationship that turned China into a major consumer of Iowa’s agricultural exports. It also turned Muscatine into a pilgrimage site for Chinese officials and tourists wanting to meet the people Xi refers to as “old friends.”

So it was with some surprise that, a few months after the book’s publication, Muscatine watched Xi respond to a trade war with the United States by slapping steep tariffs on one of Iowa’s biggest exports: soybeans.

The tariffs caused a 20 percent drop in the price of U.S. soybeans and the first serious strain in a decadeslong alliance on which U.S. farmers and Chinese consumers have come to rely. Local farmers say they understand the White House’s desire to challenge China on trade issues, but they worry that they will lose their grip on an export market developed through years of citizen diplomacy.

“I grow a lot of food, and they have a lot of people who need to eat. The tariffs are bad for both of us,” said Tom Watson, who grows corn and soybeans a short drive from Muscatine.

The trade dispute came up when officials from a Chinese sister city of Muscatine visited Watson’s farm last month — the latest of dozens of delegations to travel to the area in recent years.

The visit was warm and friendly, with some horsing around on dirt bikes and fourwheelers, Watson said, but the conversation turned serious when the officials asked how the tariffs were affecting him.

Watson explained how the lower pricing would hit his business and stressed that Iowa and China “need each other.” In the next few weeks, Watson will start harvesting his soybean crop, about twothirds of which he plans to put in storage, instead of selling, because the current price is too low. He presold the other third of his expected crop at a higher price earlier this year, before China announced its tariffs.

At a dinner with community leaders later that evening, Pengyun Sun, the mayor of Zhengding, said he was sorry to hear about the “bad impact” on Watson. The dispute “won’t do either side any good,” he said from the sidelines of the buffet supper at a local golf club, where the cooks prepared fried rice and other dishes.

“Cooperation and collaboration are the only way for the two coun tries to deal with each other,” Jun Liu said in a speech. “We really don’t have time for trade friction, trade wars.”

The trade tensions boiled over this year, when President Donald Trump began slapping tariffs on tens of billions of dollars of Chinese imports, accusing the country of flooding the United States with cheap goods, stealing U.S. intellectual property and unfairly blocking U.S. companies from the Chinese market. Beijing responded with tariffs on some of its biggest imports from the United States, including soybeans, which China uses as animal feed for its rapidly expanding production of cattle, pigs, poultry and fish.

China consumed about 30 percent of U.S. soybean production before the trade spat, a relationship supported by years of trade delegations traveling back and forth to build trust, according to Iowa farmers and the soybean industry’s export council.

Beijing’s tariffs have now made U.S. soybeans more expensive for Chinese buyers, causing them to shift some purchases to Brazil and other producers. That shift helped drive down U.S. soybean prices.

Robb Ewoldt, who farms 1,100 acres of gently rolling land near Muscatine, said the dispute comes at a bad time for U.S. farmers, who have been struggling with rising costs for land, fertilizer and seed. “We were already under that stress. To have this come on top of it wasn’t good,” he said.

Ewoldt said he is hopeful that the Trump administration’s planned $12 billion in emergency aid to farmers hurt by Chinese tariffs will help offset the drop in soybean prices.

And Ewoldt said he is sympathetic to the administration’s efforts to take a tough stance on trade if it thinks China is acting unfairly. “If it makes the country better, I’m for it,” he said.