Trump trade policies harming American business revenues
Tariffs against Chinese and Mexican imports are showing up in the United States as harmful to local business operations.
Tyson Foods, the world’s second largest processor of chicken, pork and beef, warned shareholders that earnings will be reduced by uncertain trade policies and tariffs.
In retaliation for U.S. tariffs, China and Mexico placed tariffs on imports of beef and pork from the United States.
Mexico has been buying 25 per cent of U.S. pork and the American industry has recently expanded to meet Mexican demand.
The warning of a 10 per cent to 13 per cent drop in earnings sliced Tyson market value by $1 billion. Pork is likely to take a bigger price hit than beef. Beef makes up a small portion of exports to China. Meanwhile GM cut earnings projections by six per cent over tariffs. U.S. farmers are facing a 12-year low in income this year from lower trending prices even without the impact of trade wars and tariffs.
Given that scenario, the president announced a $12 billion direct payment to farmers for soybeans, sorghum, corn, cotton, dairy, beef and pork. Payments should start in September. Some observers wonder how the $12 billion subsidy will impact farm land prices. Sudden cash injections tend to drive up prices.
The fallout from lower commodity prices will damage Canadian farm incomes as prices decline.
In mid-July Bloomberg reported 26 raw material prices declined an average of 2.7 per cent in one week — the most since February. Soybeans dropped 6.2 per cent that week. Soybeans are still being exported from United States to China with a 25 per cent tariff. Even if China buys the Brazilian and Argentine crops it will be 20 million tonnes short of needs. Brazilian soybean farmers enjoy suddenly skyrocketing prices.
The U.S. Department of Agriculture estimates Chinese soybean purchases from the U.S. will fall for the first time in 15 years and leave a hole in exports.