More Chinese Tariffs Hit US Ag

Source: By Chris Clayton, Progressive Farmer • Posted: Sunday, August 25, 2019

President Trump Retaliates Against China’s Actions

The president reiterated in a tweet China continues stealing intellectual property to the tune of hundreds of billions of dollars. Trump then said $250 billion in Chinese products now subject to 25% tariffs will instead face a 5% higher tariff starting Oct. 1, putting the tariffs for those products at 30%.

Further, another $300 billion in goods that was facing new 10% tariffs starting Sept. 1 will now face 15% tariffs instead, Trump tweeted.

The president’s decision came after Chinese officials earlier Friday announced higher tariffs on $75 billion in U.S. products.

U.S. agriculture remains caught in the middle of the dispute. Soybeans will face a 5% higher tariff starting Sept. 1. That will put tariffs against U.S. soybeans at 30%. Pork and beef will face 10% higher tariffs as well on Sept. 1.

Still, China had already announced earlier in August that it will stop buying U.S. agricultural products for now.

November soybeans fell 13 cents on Friday to $8.55 a bushel, and December corn fell four cents to $3.67 a bushel. Stocks also fell as the Dow Jones Industrial Average was down 2.66%.

Before the president’s late-afternoon tweets, the American Farm Bureau Federation noted U.S. agricultural exports to China have fallen from $19.7 billion in 2017 to $9.1 billion last year and were down another $1.3 billion in the first half of 2019. The new tariff announcement “signals more trouble for American agriculture,” said Zippy Duvall, president of AFBF.

“Continuing negotiations is the best way to restore certainty to export markets farmers and ranchers depend on,” Duvall said. “We need substantive trade agreements that ensure American agriculture can provide an abundant and safe food supply for the world’s growing population.”

Roger Johnson, president of National Farmers Union, also pushed back on the president’s trade agenda and said it’s no surprise that U.S. farmers are again the target of retaliation. Highlighting some of the financial problems facing farmers, Johnson pointed to farmers making about half what they made in 2013, adding farm debt is rising as a result.

“Chronic overproduction continues to push commodity prices down, and extreme weather events and higher temperatures caused by climate change have made the job of growing food that much more challenging,” Johnson said. “But instead of looking to solve existing problems in our agricultural sector, this administration has just created new ones. Between burning bridges with all of our biggest trading partners and undermining our domestic biofuels industry, President Trump is making things worse, not better.”

The American Soybean Association reiterated Friday that the group “has strongly requested an end to the tariffs on U.S. beans for more than a year,” said Davie Stephens, president of ASA. “This escalation will affect us not because of the increasing tariff on our sales, which have been at a virtual standstill for months, but through time. The longevity of this situation means worsening circumstances for soy growers who still have unsold product from this past season and new crops in the ground this season — with prospects narrowing even more now for sales with China, a market soy growers have valued, nurtured, and respected for many years.”

ASA, like Farm Bureau, called on the U.S. and China to negotiate and find a resolution.

If the new tariffs go into effect, U.S. pork would face a 60% retaliatory tariff along with a 12% standard duty from China.

The tariff hike is a blow for U.S. pork producers, which had seen rising sales to China. The pork industry also has been anticipating even more demand from China because of African swine fever devastating China’s hog herd.

The National Pork Producers Council stated Friday, “Any escalation in the trade dispute with China is a major concern to U.S. pork producers. China, the largest pork-consuming nation in the world, is seeking reliable sources of pork as it deals with African swine fever. There is no more reliable source than the United States. Unfortunately, due to the current trade dispute, we are not able to fully participate in this opportunity.”

Corn, sorghum and wheat also will be hit with 10% higher tariffs, but those will not begin until Dec. 15. Tariffs on those crops right now are 10%, and the U.S. has effectively been shut out of the market.

In a series of midmorning tweets, Trump said the U.S. has lost trillions of dollars to China over the years through intellectual theft and he will not let that continue. The president added the U.S. is better off without China. Then the president said U.S. companies are “ordered” to look for markets outside of China.

“Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the U.S.A. I will be responding to China’s Tariffs this afternoon. This is a GREAT opportunity for the United States,” Trump tweeted.

Before those tweets, the president criticized Federal Reserve Chairman Jay Powell, who gave a speech Friday morning but did not indicate another interest rate decline was in the works. Trump lashed out Powell and Chinese President Xi Jinping.

“….My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?” Trump tweeted.

Chinese officials announced the tariffs in a statement, pushing back on the Trump administration’s 10% tariff increase that will come in two rounds on $300 billion in Chinese goods starting Sept. 1 and Dec. 15.

China also will hit the U.S. auto industry, with 25% tariffs on vehicles and a 5% tariffs on parts starting Dec. 15. China had put a hold on these auto tariffs in April.

The tariffs hit U.S. agriculture as farmer frustrations have risen over trade, the Trump administration’s handling of refinery waivers for biofuels, and a challenging crop year. Future prices for the November soybean and December corn contracts peaked in mid to late June and have steadily declined since then.

ECONOMIC IMPACT ON AGRICULTURE

In a related item, USDA on Friday also released its economic analysis of trade damage with the new Market Facilitation Program payments. USDA again weighted the damage done to specific crops, which included estimated rates of damage: $2.05 a bushel for soybeans; 26 cents a pound for cotton; 14 cents a bushel for corn; 41 cents a bushel for wheat; and $1.69 a bushel for sorghum. Prices were set for other commodities as well.

USDA then took historical planted acres and crop yield in a county and multiplied that by the payment rate. For instance, a county with 20,000 acres of corn at 180 bushels an acre X .14 cent a bushel equals $504,000. For soybeans, 10,000 acres in that same county at 60 bpa X $2.05 equals $1.23 million. The $504,000 and $1.23 million are added together, $1.734 million is divided by 30,000 total acres planted in the county to equal $58 an acre.

USDA’s analysis has provided more examples and explanations about how livestock rates and specialty crop payments were created as well.

You can view the USDA’s analysis of 2019 Market Facilitation Program payments here: https://www.usda.gov/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

 

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