Farmers would suffer under China tariffs
Business confidence would feel the effects, some say
China’s announcement Monday that it will raise tariffs on $60 billion of American goods compounds the pain in what is fast becoming all-out trade war between the two countries as U.S. farmers, chemical makers and others brace for a further hit to revenue.
“Effectively, that market (China) is closed to U.S. exporters,” says Ed Bryztwa, director of trade for the American Chemistry Council.
China said it’s lifting the tariffs from a range of 5% to 10% to as much as 25%, with many goods set to be taxed at the upper limit. The higher duties are scheduled to take effect June 1.
About 5,000 products are affected, including beef, fruit, vegetables, coats, refrigerators, furniture and saws.
Chinese officials announced the countertariffs after the Trump administration on Friday raised tariffs on $200 billion in U.S. imports from China from 10% to 25%.
The retaliatory tariffs China unveiled alone won’t significantly ding the U.S. economy, cutting economic growth by about a tenth of a percentage point next year if the trade fight isn’t resolved, according to Oxford Economics and Moody’s Analytics. But all existing U.S. and Chinese duties, including those announced Monday, will shave growth by three-tenths of a percentage point next year, says Oxford economist Greg Daco. Moody’s chief economist Mark Zandi expects an even bigger impact of nearly half a percentage point.
The fallout for investors has been more prominent. The Dow Jones industrial average tumbled more than 600 points Monday. That’s partly because multinational corporations with significant exports could see less revenue and profits, Zandi says. The bigger toll is on business confidence and investment, he says.
“It raises the probability of a fullblown trade war, which will hammer earnings,” Zandi says.
So far, China has slapped tariffs on $100 billion in U.S. goods. As a result,
“(A tariff) continues to ratchet down the amount of cash we have to pay bills.” John Heisdorffer, soybean farmer
U.S.exports to China fell 7% in 2018, according to the U.S.-China Business Council. And Chinese investment in the U.S. was down 60% last year, “in part because of added scrutiny applied to proposed deals and a souring political climate,” the group says.
U.S. farmers, who have been especially affected by China’s tariffs last year, are likely to suffer an additional blow.
John Heisdorffer, a soybean farmer in Keota, Iowa, has lost about $10,000 since China put a 25% levy on U.S. soybean shipments last year as prices fell from more than $10 a bushel to about $8. U.S. soybean exports to China effectively halted before rising modestly recently as part of Chinese concessions during negotiations. Heisdorffer says he has cut back on investments in new equipment.
After Monday’s news, soybean futures fell another seven cents. Although soybeans aren’t directly affected by the latest round of Chinese tariffs, various soy-related oils and extracts will be hit.
“I thought it was going to be resolved last week,” Heisdorffer says. “I don’t know what to think now. It continues to ratchet down the amount of cash we have to pay bills.”
If the conflict drags on, he says, there won’t be anything left to give his son, who plans to take over the farm when Heisdorffer, 67, retires.
Heisdorffer, who is chairman of the American Soybean Association, also worries the number of soybean farmers who go bankrupt will increase substantially if the latest Chinese tariff isn’t removed.
Stefanie Smallhouse, president of the Arizona Farm Bureau, said the prospects of tariffs that could undercut exports to China come at an already bad time for the state’s agricultural industry.
Farmers and ranchers already have been paying higher prices for equipment, seed, fertilizer and other expenditures – partly due to tariffs that raised the price of steel and aluminum imported into the U.S.