In the high stakes poker game of trade and tariff threats, China raised its bet today, announcing it will impose an additional $50 billion in tariffs, including a 25 percent tariff on U.S. soybean and beef imports if the U.S. follows through on the Trump administration’s counter-threat of a 25 percent tariff totaling $50 billion on Chinese imports of electronics, machinery and aerospace products.
Even though China’s tariffs will not take effect until the proposed U.S. tariffs go into effect, commodity markets reacted quickly to the news, with soybean futures dropping nearly 40 cents a bushel in early hours of trading Wednesday.
With a projected 2018 crop of 4.3 billion bushels, American soybean farmers lost more than $1.7 billion in value to their crop during morning trading, according to Ernie Birchmeier, manager of the Center for Commodity Farm and Industry Relations and the Livestock and Dairy Specialist for Michigan Farm Bureau.
“As the number-two export market for U.S. agriculture, with $19.6 billion in sales in 2017, China imported $13.9 billion of U.S. soybeans in 2017, accounting for 60 percent of total U.S. soybean exports and nearly one out of every three rows of annual soybean production,” he said, adding the news couldn’t come at a worse time with an already struggling farm economy.
“Tariffs targeting China will continue to result in retaliation against U.S. agricultural exports by imposing additional tariffs and possibly other restrictions,” Birchmeier said. “Overreaction is the worst possible reaction at this time. Certainly, the ag industry is very concerned about the potential impact of these trade disputes.”
The Michigan Soybean Association also underscored the crucial importance of trade with China, the leading buyer of U.S. soybeans, and is urging leaders from both the U.S. and China to return to the negotiating table and resolve differences without escalating the current trade dispute.
“We are already in a deeply uncertain time in the agricultural economy, and soybean farmers are extremely concerned that the escalating conflict between the U.S. and China will cause further damage,” said Dave Williams, president of the Michigan Soybean Association.
“The tariffs announced by China will lead to real money lost for farmers that they won’t be able to reinvest in their farms or spend at local equipment dealers, restaurants or movie theaters in rural communities throughout the nation. This situation is entirely preventable and must be resolved,” he said.
President Trump announced on March 23, 2018, that the U.S. would begin the process to impose tariffs on Chinese exports due to concerns over Chinese practices that impact U.S. intellectual property.
Public comments on the recommended tariffs are due to the U.S. Trade Representative by May 11. A hearing will be held May 15. Post-hearing comments are due May 22. The Administration then has 180 days in which to make a decision.
Birchmeier said Michigan Farm Bureau policy calls for provisions in trade agreements that prevent economic damage to sensitive commodities and circumvention of domestic trade policy and tariff schedules while advancing U.S. agricultural trade and food security interests. “We need to continue to communicate our message to our elected officials, the administration and especially the United States Trade Representatives,” Birchmeier said. “We expect all countries to trade fairly, and we support enforcement of all trade rules. But we also hope trade disputes can be resolved without harming an industry that is a bright spot on trade and is so important to rural America.”