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China standstill causing ag economic fallout

Negotiators urged to return to table to find a deal to restore prosperity for U.S. agriculture.

Relations with China were bad in 2018 and could get even worse as the year goes on as farmers continue to struggle with the ongoing trade war as negotiations are again back at a standstill. Last week, President Donald Trump announced that a 10% tariff on $300 billion of Chinese imports will go into effect on Sept. 1, 2019. China said it would not "give an inch" by offering trade concessions to the U.S. and promised to retaliate if Trump went ahead with his threat to impose more tariffs.

A spokesperson for China's Ministry of Commerce said Chinese companies have stopped purchasing U.S. agricultural products in response to the threat. “This is a serious violation of the meeting between the heads of state of China and the United States,” the minister of commerce said in a statement Monday.

China’s announcement that it will not buy any agricultural products from the U.S. is a “body blow to thousands of farmers and ranchers who are already struggling to get by,” American Farm Bureau Federation president Zippy Duvall said.

Farm Bureau economists said exports to China were down $1.3 billion during the first half of the year. In 2014, U.S. agricultural exports to China exceeded $24 billion, but from 2017 to 2018, U.S. agricultural exports to China fell more than 50% to $9.1 billion.

“Now, we stand to lose all of what was a $9.1 billion market in 2018, which was down sharply from the $19.5 billion U.S. farmers exported to China in 2017,” Duvall said.

Trump tweeted Tuesday morning that he would continue to protect farmers from the retaliation.

However, Duvall noted that despite being grateful for the Market Facilitation Program payments, “we know that aid cannot last forever.”

Instead, Duvall urged negotiators to “redouble their efforts to arrive at an agreement, and quickly. Exports ensure farmers will continue to supply safe, healthful and affordable food for families here and around the world.”

Tariffs Hurt the Heartland campaign, comprised of more than 150 of America’s largest trade organizations and agricultural commodity groups, also called on the U.S. and China to return to the negotiating table as the economic fallout from an escalated trade war continues to grow.

Jonathan Gold, a spokesman for the campaign, noted, “It’s never been more clear that tariffs are a failing strategy. Behind today’s market turmoil are real Americans who have been used as bargaining chips in this trade war. There are farmers who are defaulting on loans or filing for bankruptcy. Both sides need to return to the negotiating table immediately. Nobody wins in a trade war, and right now, everyone is losing.”

The question remains whether the tariffs will be increased as threatened, as reports continue to find that American businesses are bearing the burden of the tariffs. A study commissioned by Tariffs Hurt the Heartland and prepared by Trade Partnership Worldwide found that if tariffs of 25% are imposed on all remaining imports from China and retaliation follows, the U.S. economy could lose more than 2 million jobs over the next few years, the average family of four would face more than $2,000 in higher costs annually and the value of U.S. gross domestic product would drop by 1%. This analysis includes the impact of previously implemented tariffs.

Bill Lapp, executive vice president of Advanced Economic Solutions (AES), said he believes “there is a high probability that the U.S. will not impose an additional $300 billion in tariffs prior to Sept. 1.”

Lapp added that while the increased tariffs play well with “the base,” the impact of the new tariffs on the U.S. economy and the stock market could be dramatic, and the White House recognizes this as well.

“Within the White House leadership, only Peter Navarro supports the imposition of these tariffs. As a result, AES views the proposed tariffs as part of the White House negotiating tactics and believes the White House will find a way to back away from the proposed tariffs prior to Sept. 1,” Lapp added.

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