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China trade war hits ag harder starting July 6

Targeted U.S. products include soybeans, cotton, sorghum, wheat, vegetables, beef, pork and others.

Threats of China’s tariffs on U.S. agricultural products are no longer a threat but a reality as the mega nation has retaliated against President Donald Trump’s 25% tariff on $34 billion worth of Chinese goods, which took effect at midnight July 6.

The targeted U.S. products include soybeans, cotton, sorghum, wheat, vegetables, beef, pork and others. These tariffs have been on the docket since mid-June as the tit-for-tat trade discussion between the U.S. and China continues to evolve.

Daren Coppock, president and chief executive officer of the Agricultural Retailers Assn., explained that, according to the latest data from the U.S. Department of Commerce as of July 6, the U.S. had a total global trade deficit of more than $736 trillion in 2017; China’s share was more than $375 trillion, virtually half of the total.

In an op-ed, Coppock explained that agriculture is one of the few sectors that maintains a positive trade balance but is now placed at risk as leverage to address other aspects of the U.S. trading relationship with China.

“If you look only at the trade balance of agriculture and livestock products, the picture is vastly different with China. United States agricultural products have a positive balance of trade globally, to the tune of nearly $17 trillion in 2017. China’s share of that was $15.5 trillion in 2017; over 90% of our positive trade balance in agriculture was attributable to exports to China. Over the last four years, over 80% of our positive agricultural trade balance is due to trade with China,” Coppock said.

He noted that there isn’t a farm bill program large enough to mitigate the short-term damage to farmers and their business partners. “Despite noble intentions, the Agriculture Department cannot create a program to immediately restore broken trade relationships and reputations, mitigate the damage to input suppliers and grain merchants who serve farmers or prevent our export customers from finding or creating new sources of supply,” Coppock wrote.

The Mississippi River Cities & Towns Initiative, comprised of 85 mayors and representing cities on the main stem of the Mississippi River from Minnesota to Louisiana, also voiced concerns about the tariffs now in place.

U.S. agricultural exports to China are critical to the Mississippi River economy, with exports of agricultural products to China totaling $19.6 billion in 2017. China is the largest international destination for U.S. soybeans, importing more than 27 million tons in 2017 — 30% of all U.S. soybean production — and is the second-largest agricultural export market overall for the U.S.

“I think the Administration has shown the U.S. takes its trade position very seriously and is totally committed to pursuing a better balance for the nation. We can take that position of strength and further negotiate without putting so much of our economy at risk amongst the Mississippi River’s main trading partners of Canada, China, Mexico and the European Union,” said Colin Wellenkamp, executive director of the Mississippi River Cities & Towns Initiative.

The American Soybean Assn. (ASA) noted that U.S. soy prices have dropped more than $2/bu. since talk of the tariffs began back in March. U.S. producers shipped $14 billion worth of soybeans to China in 2017.

“Soybeans are the top agriculture export for the United States, and China is the top market for purchasing those exports,” said ASA president John Heisdorffer, a soybean grower from Keota, Iowa. “The math is simple. You tax soybean exports at 25%, and you have serious damage to U.S. farmers.”

Pork farmers are receiving a double blow. China's latest round of 25% tariff is in response to U.S. action under Section 301 on intellectual property concerns and is on top of the 25% punitive duty China levied in early April in response to the Section 232 tariffs Trump applied because of steel and aluminum concerns. Mexico also placed a punitive tariff on U.S. pork – at 10% from June 5 until July 5 and now rising to 20%.

The National Pork Producers Council (NPPC) noted that “40% of total American pork exports now are under retaliatory tariffs, threatening the livelihoods of thousands of U.S. pig farmers.”

NPPC president and Johnstown, Ohio, hog farmer Jim Heimerl said, “America’s pig farmers and their families are patriots who are demonstrating enormous commitment to the greater good of our country as they shoulder a disproportionate share of trade retaliation against the United States. We need these trade disputes to end.”

Wheat groups reported that Chinese flour milling companies and their importers purchased an average of about 20 million bu. of U.S. wheat, returning well over $145 million to American farm families and grain handlers. Not in 2018, however. Unable to accept the risk of escalating import prices, Chinese customers stopped making new purchases of U.S. wheat in March after the Chinese government threatened a 25% import tariff on U.S. wheat in retaliation for the proposed U.S. tariffs on Chinese imports.

In a joint statement, the U.S. Wheat Associates and the National Association of Wheat Growers said the exchange of punitive tariffs between Washington, D.C., and Beijing, China, represent the next phase of “what could be a long and difficult struggle that will likely inflict more pain before we reach an unknown resolution.”

The wheat groups added, “China did not stop importing U.S. wheat in response to these cases, in part because Chinese demand for our high-quality wheat crops is rapidly growing. The unilateral decision to impose tariffs, however, has already had a direct, damaging effect on U.S. wheat growers. Wheat growers can only hope that the United States and China will stop trading salvos and we call on both governments to come to a resolution quickly. Farmers are eager to move past this dispute and start trading wheat and other agricultural products again soon.”

Americans for Farmers & Families spokesman Casey Guernsey said America’s farmers and their families are staring down a dark path with no signs of relief in sight.

Guernsey added, “With the lowest farm income in 16 years and our largest markets for agriculture products now reducing their imports and purchasing goods from our competitors, we are counting on the Administration and Congress to reach a resolution on responsible trade policies – before we’re forced to shut down our operations for good.”

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