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Will China Retaliate?

14:25PM May 06, 2019
Trump & Xi

"we could see additional tariffs on a lot of our commodities. Although at this point in time we have tariffs on just about everything from a foreign product was that we ship into China.”( MGN Online )

If President Trump’s threat to increase tariffs on Chinese goods is realized, the Chinese government is likely to retaliate says John Newton, chief economist at the American Farm Bureau Federation. However, he says there aren’t many farm commodities left to target.

“I would anticipate that if we do impose those additional tariffs that the Chinese government would respond, and as they've responded in the past,” he says. “So, we could see additional tariffs on a lot of our commodities. Although at this point in time we have tariffs on just about everything from a foreign product was that we ship into China.”

Additionally, Newton says there aren’t a lot of shipments being made to China from the U.S. which makes the form of retaliation hard to pinpoint, but that’s not keeping U.S. commodity markets stable. The Dow Jones Industrial Average and soybean markets both took significant tumbles on the news.

“It remains to be seen on what the ultimate impact of that would be,” he says.

In the case of pork products, tariffs have been more than 60% at their peak, but still there have been confirmed sales to China. That doesn’t necessarily mean our pork has been on ships bound for China.

“A sale is not a shipment,” Newton says. “So, when you're tracking actual products that have been loading onto a boat and shipped to China, the numbers are far less than what they have committed to buy.”

Additionally, there’s some question as to whether the purchasers will actually pay the tariffs or if the tariffs will be absorbed by state-owned enterprises. Bottom line, there’s a lot of unknowns with respect to how much worse this situation could get for farmers.

“Raising the tariffs is really not going to make a lot of difference if we're not shipping a lot to begin with,” he says adding that some farmers could see higher costs of inputs if they’re Chinese sourced goods.

“Ultimately we think that this is part of the negotiating effort to try to get a deal done. The rumor was that we'd see something by the 10th, that's this week. So hopefully, the U.S. and Chinese can come to some sort of agreement,” he says. “I think it all really boils down to enforcement mechanisms of U.S. government wants to leave the tariffs in place to make sure that the Chinese follow through with their commitments. I think the Chinese want to see the tariffs removed. But I don't think this administration has shown any propensity to back down and neither has the Chinese government.”