Retaliation was expected, as were alarmist reports and opinions about just how far into the economic tank President Donald Trump’s trade rhetoric and actions would plunge the nation and the world.
But today, after China officially became the latest and largest U.S. trading partner to retaliate to trade tariffs with tariffs of their own, there was just a smidgeon of a level-headed and patient attitude out there, although it’s been hidden behind a sense of urgency.
The urgency, of course, wouldn’t be center stage if soybean and dairy prices, along with most other farm commodities, weren’t already in the tank.
But for a little perspective, especially when it comes to trade with China, American Farm Bureau (AFBF) President Zippy Duvall reminded farmers why the U.S. put on tariffs to begin with. China has been stealing intellectual property from the United States. Quite likely, China has had things stolen as well.
“On April 3, the Trump administration announced it was reacting to an August 2017 investigation into Chinese intellectual property theft by considering a 25 percent tariff on imports of about 1,300 Chinese product lines valued at $50 billion in total,” AFBF reported earlier this year. “The following day, China countered with a retaliation list of 106 imports from the U.S.—including soybeans, sorghum, cotton, corn, wheat, beef and other products—that will be subject to a 25 percent tariff. Thirty percent of U.S. soybeans—about $14 billion worth per year—go to China, making soybeans the United States’ top ag export to China.”
The reasons behind the tit-for-tat actions between nations, however, don’t matter as much as how long this arm-punching will continue. Because, for American agriculture, bruises aren’t healing.
“With tariffs set to go on today from China on American products, it’s imperative we continue to work with the Trump administration to help it understand the importance of trade from an agricultural standpoint, and the importance of the fact that we need to continue to have access – free and fair access – to other markets,” said Michigan Farm Bureau livestock and dairy specialist Ernie Birchmeier. “Our farmers have proven we can compete with anyone, as long as we have the opportunity to do so on level playing field.”
International trade, however, has rarely been played on a level field. Nations continually look for advantages, and in a fallen world, some cheating is to be expected.
However, what’s causing a lot of the consternation over trade saber-rattling is that years of work to find and develop markets could be undone, no matter the reasons.
“Soybean farmers have worked with the U.S. Department of Agriculture for 60 years to develop foreign markets for soybeans,” said Dave Williams, president of the Michigan Soybean Association. “While we work in many markets, our most impressive growth has occurred in China. Through a long-term and comprehensive program to demonstrate the value of soy-based feeds, the U.S. soybean industry helped build demand for soybeans to the level China imports today.”
Since 1995, while feed use in China grew 140 percent, soybean meal used in animal feed rose an astronomical 839 percent, the American Soybean Association (ASA) said in a statement.
“We’ve seen the amount of soybean meal used in aquaculture feeds grow from zero just 20 years ago to 7 million metric tons this year,” ASA said. “The value of U.S. soybean exports to China has grown 26-fold, from $414 million in 1996 to over $14 billion in 2016. We are very proud of this record, and of our role in helping to feed a growing world. There is room for us to grow our exports and we should be focused on ways to expand trade instead of restricting it.”
While there remains hope that the long-term impact of persistent rhetoric will be positive, the short-term impact will hit American farmers hard, said the Agricultural Retailers Association in a statement.
“If the United States loses even a share of its market for agricultural products to China or other export markets, there isn’t a farm bill program large enough to mitigate the short-term damage to farmers and their business partners,” the association said. “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.
“We need to remember the lesson of the Nixon soybean export embargo in June of 1973, which caused our buyers in Japan and Europe to seek new suppliers and led to a dramatic expansion of the soybean industry in Brazil,” the retailers said. “Trade disruptions have serious and lasting long-term consequences. Our hope is that whatever trade disruptions occur during these negotiations will be very short in duration, and that American agriculture – much of which supported Mr. Trump in 2016 and continues to support many of his policy objectives – will not be offered as a sacrifice to achieve gains elsewhere.”
As American farmers wait for the long-term implications of what some analysts are calling a trade war, markets responded with volatility, something to which farmers have become accustomed. The day before the official Chinese announcement, new corn prices settled at $3.63 per bushel, and soybeans fell to $8.55.
While the trade conflicts in some ways may be all about politics, farmers are growing weary of being a political punching bag, Birchmeier said.
“We appreciate the fact that the Trump administration is willing to take on and deal with these difficult tasks, but we need to make sure this issue does not linger, because every day it happens it hurts our American farmers during these times when across the country, farmers are struggling,” he said.
What’s the best way to deal with a playing field filled with peaks and valleys?
“Farm Bureau believes in negotiations, not additional tariffs, to resolve trade issues,” AFBF told Congress last spring. “American farmers and ranchers rely heavily on export markets for their business success, especially at this time of reduced farm income. Agriculture needs a growing trade, not a reduced and burdened trade.”
Click here to see the entire list of 545 products from the Chinese Ministry of Finance targeted for possible 25 percent tariff.