The effect of the 25 percent tariff on steel imports has continued to build since they were enacted in the spring, contributing to higher prices for U.S. steel. According to Trump administration trade officials, the Section 232 steel and aluminum tariffs have already had major, positive effects on steel and aluminum workers, jobs and prices as intended.
But according to Michigan Farm Bureau (MFB) Field Crops Specialist Kate Thiel, the U.S. steel industry’s gain is U.S. agriculture’s loss. She says for every action, there is a reaction. “The reaction, in this case unfortunately, has come in the form of retaliatory tariffs from our trading partners, particularly China,” she said.
The tariffs on U.S. imports of steel and aluminum and the additional tariffs applied on U.S. agricultural products by our partners are both having the intended effect, according to American Farm Bureau Economist, Veronica Nigh.
“Since the beginning of April, U.S. HRB steel futures prices have risen 11 percent, while U.S. soybean FOB prices have fallen 18 percent over the same time period,” Nigh explained. “China, which has been slapped by both 232 tariffs as well as the tariffs that resulted from the U.S. 301 investigation related to intellectual property theft, has targeted U.S. agricultural products in its retaliation efforts.”
To date, says Nigh, approximately 90 percent of U.S. agricultural exports to China face some sort of additional tariff.
In announcing the $12 billion tariff assistance program last week, USDA Secretary, Sonny Perdue, said the department projects that current tariffs on U.S. agriculture will hit $11 billion in 2018. According National Milk Producers, the cost to dairy producers alone, will hit $1.8 billion.
Thiel says the price impact to major U.S. agricultural commodities has been swift and significant, with nearby futures contracts on the Chicago Mercantile Exchange and new-crop contracts on the Chicago Board of Trade showing losses of 14 to 20 percent since contract-highs in late-May, prior to the tariff announcements.
“For Michigan producers of corn, soybeans and wheat, market values of new crop contracts on the Chicago Board of Trade have plummeted over $511 million in 48 days from May 29 to July 16,” Thiel said, adding the long-term market loss could make matters worse as China seeks additional soybeans and product from Brazil and Argentina.
Brazilian and Argentinian soybean FOB prices have gained significant premium over U.S. soybeans since Chinese tariffs on U.S. soybeans went into effect. At close of business July 20, the premium was $55 per MT for Brazilian soybeans and $52 per MT for Argentinian soybeans.