By Ty Higgins, Ohio Ag Net
A soft farm market, already-declining prices, and now China’s retaliation against President Trump’s 25% tariffs on $34 billion worth of Chinese goods have become a reality for Ohio producers. Soybean farmers, whose crop represents 41% of the value of products on China’s tariff list, will feel the full effect.
“This is about as close to a worse-case scenario as you can get,” said Bret Davis, a Delaware County soybean farmer and a member of the American Soybean Association Governing Committee. “We had hoped that cooler heads would prevail and that the tariff threats would be nothing more than that, but it sure doesn’t look that way right now.”
The value of U.S. soybean exports to China has grown 26-fold in 10 years, from $414 million in 1996 to $14 billion in 2017. Since talk of the tariffs began back in March, U.S. soy prices have dropped more than $2 per bushel.
“When Secretary Perdue and President Trump said they would be taking care of farmers if need be I knew that things with China weren’t going according to plan,” Davis said. “We don’t want to be taken care of. We want to have a free market. The way to solve this is for us to sell more soybeans to China, not less.”
Soy growers rely heavily on exports to China. In 2017, China imported 31% of U.S. production, equal to 60% of total U.S exports and nearly 1 in every 3 rows of harvested beans. Over the next 10 years, Chinese demand for soybeans is expected to account for most of the growth in global soybean trade, which underscores the importance of this market for future U.S. soybean sales.
When President Trump has talked about trade over the past year, he has assured agriculture and other industries that there may be some pain in the beginning with retaliatory tariffs, but in the end the U.S. would win. Patience from farmers was strong at first, but now is beginning to wane.
“I can understand why the President sees a positive outcome in the long run, but what it comes down to is that, as farmers, we put all of resources into growing a crop year after year and we can’t survive if we lose a third of our market,” Davis said. “We can’t survive a year with low prices, let alone two or three years. We need to sell this crop because we need the funds to grow next year’s crop. We can’t operate on deficit spending like our government does.”
As if the direct Chinese tariffs on soybeans wasn’t enough, farmers will also be feeling the pinch of other tariffs they are directly involved in, like steel and aluminum.
“Those tariffs impact the equipment we buy and the parts that go along with them,” Davis said. “Those items will now cost us more because of those tariffs and yet we are making less money because of the other ones.”
China may be upping the stakes in its tariff fight with the United States, adding a new tactic that could further complicate a trade dispute increasingly entangling U.S. farm exports. Heightened customs inspections, quarantines ending with spoiled produce, stalled product approvals, and licensing applications are all new complaints of U.S. firms doing business in and with China.
All these are raising fears that Beijing’s trying to “even the score” in its tariff dispute with the U.S., where China’s huge export advantage here exposes it to much greater tariff damage.
“This is a warning shot,” said Paul Drazek, former USDA Trade Adviser. “This is the Chinese saying that they don’t have enough tariff retaliations to balance what the U.S. has done, but they have other means at their disposal and those tactics could affect products in a more damaging way then tariffs would.”
Drazek, like many, doesn’t see how all this ends if neither side backs down. He hopes it ends with a return to the bargaining table. Otherwise, he fears a global recession.
China’s total duties on U.S. pork now top 60%, and a 40% total for U.S. soybeans. But, President Trump threatens to slam China with duties on up to $416 billion worth of goods if China fails to meet his trade demands.
“We now face large financial losses and contraction because of escalating trade disputes,” said Jim Heimerl, president of the National Pork Producers Council and a hog farmer from Johnstown, Ohio. “That means less income for pork producers and, ultimately, some of them going out of business.
“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.”