Last week’s sudden move by President Donald Trump to increase tariffs on Chinese goods changed the outlook for Midwestern farmers for the worse, according to agricultural economists and commodity group leaders.
Trump announced late on Sunday, May 5, that he would raise tariffs by the end of the week. On May 10 he said he would implement the increase, elevating tariffs from 10 percent to 25 percent on $200 billion worth of Chinese goods.
China responded over the weekend, announcing it will raise tariffs as high as 25% on $60 billion worth of U.S. goods.
“It’s one of those deals where we had built up for weeks thinking we were close to a deal and then suddenly it was a case of ‘no, we’re not,’” Iowa State University Agricultural Economist Chad Hart said May 10.
Now it is difficult to see where negotiations go from here, he said. As a result, farmers probably need to reduce their hopes for higher grain prices in the near future.
For farmers, this means adjusting marketing plans to take advantage of any small market increases they may see. More farmers might consider planting short-season corn hybrids in wet areas rather than making the switch from corn to soybeans due to the fact that the United States ships a large percentage of the soybean crop to China.
While the president has blamed China for the situation, saying the Chinese government has backed off on earlier promises made, it is the president who made the tariff move. It is possible his move was an effort to speed the negotiations toward a conclusion, Hart said. But he added there is an inherent risk in that it could have the opposite impact on negotiations.
“One of the risks right now is that this could possibly backfire and put us further back than we were before (in trade negotiations),” Hart said. “Any resolution has to be sort of a win-win for the U.S. and China.”
Bloomberg reported U.S. and Chinese officials wrapped up high-level trade talks on May 10, lacking a deal yet avoiding a breakdown in negotiations even after Trump boosted tariffs on $200 billion in goods from China and threatened to impose more.
The U.S. gave its bottom line in talks in Washington, saying Beijing had three to four weeks more to reach an agreement before the Trump administration enacts additional tariffs on $325 billion of Chinese imports not currently covered by punitive duties, according to two people familiar with the talks.
Leaders of the American Soybean Association, National Corn Growers Association and National Association of Wheat Growers issued a statement May 10 expressing concern about Trump’s move.
“We have heard and believed the president when he says he supports farmers, but we’d like the president to hear us and believe what we are saying about the real-life consequences to our farms and families as this trade war drags on,” ASA President Davie Stephens said in a news release.
NCGA President Lynn Chrisp said in the release that “holding China accountable for objectionable behavior is an admirable goal, but the ripple effects are causing harm to farmers and rural communities. Farmers have been patient and willing to let negotiations play out, but with each passing day, patience is wearing thin.”
After Trump and Secretary of Agriculture Sonny Perdue suggested in tweets and comments to White House reporters that the administration would be pursuing more trade aid packages for farmers, commodity leaders said the concern now is not just for 2019, but also for the next several years.
“U.S. pork has suffered from a disproportionate share of retaliation due to trade disputes with Mexico and China. This retaliation turned last year — which analysts had forecast to be profitable — into a very unprofitable time for U.S. pork producers,” National Pork Producers Council president David Herring said in a news release.
“While there is no substitute for resolving these trade disputes and getting back to normal trade, NPPC welcomes the offer of assistance from President Trump. We stand ready to work with the USDA to facilitate U.S. pork exports as food aid to a number of nations.”
In the midst of all this turmoil over trade with China, it is worth noting that Congress in the United States, as well as deliberative bodies in Canada and Mexico, have yet to approve the United States-Mexico-Canada Agreement (USMCA), and the president’s tariffs on aluminum and steel appear to be a major stumbling block in that process.
The USMCA was an easy negotiation compared to the China negotiation, Hart said. The USMCA was a relatively minor update of the North American Free Trade Agreement (NAFTA). The China negotiation is one that is much more complex.
If not resolved soon, the trade war could impact soybean trade with China for “generations to come,” the ASA’s Stephens said in the press call.