The Economic Bullets Are Real For Farmers In Trade War With China
Apr 05, 2018
By Tim Burrack: Arlington, IA
The talking is over. Now we’re fighting a real trade war—and here on my farm in Iowa, I’m on the front line.
The dispute between the United States and China poses a direct threat to my livelihood. Because of the new and emerging tariffs on both sides, the things I grow will sell for less and the things I buy will cost me more.
This week the price of hogs dropped $12 for every pig I sell. This morning (Apr 4), soybeans are down 40 cents a bushel – a $1.7 billion loss to the value of US soybeans. And if I want to make new capital purchases of machinery or grain bins—anything made with steel or aluminum—I’ll have to pay a higher amount.
For years, we’ve engaged in a war of words with China over trade. American officials have complained about everything from China’s currency manipulation and subsidized industries to a trade deficit that hit a record level in 2017. The difference between what Americans bought from China and what Chinese bought from the United States reached $375 billion last year. President Trump recently demanded that the United States reduce this gap by at least $100 billion.
Last month, President Trump fired a salvo, announcing new tariffs of 25 percent on imported steel and 10 percent on imported aluminum. China retaliated a few days ago with a long list of new tariffs, affecting about $50 billion of American-made products. Many fruits and nuts, for example, will face a 15 percent tax. So will a variety of stainless steel pipes.
China also slapped a 25-percent tax on pork products—a category that affects me directly because I raise hogs. We try to sell every part of these animals, from the meat to the offal. Even before the trade war erupted, pork prices weren’t very good. Now they have dropped to the lowest prices since 2003.
Now things are going from bad to worse.
The Trump administration responded on Tuesday by proposing more than 1,300 new tariffs on Chinese products, including televisions, chemicals, and machinery. They’re also worth about $50 billion, in a tit-for-tat move that aims to match China’s latest round.
Now China has shot back. On Wednesday, it added tariffs to more than 100 U.S. products, including cars and planes. This round affects me, too. If the Chinese impose the announced tariff of 25 percent on soybeans, another major product on my farm, it will lower my price $2.50 a bushel.
China isn’t the only market for my pork and soybeans. Reducing our access to this important destination, however, has global repercussions. The bottom line is that what I produce is suddenly worth less money. My competitors in Argentina and Brazil must be celebrating their good luck.
What will tomorrow bring? Nobody knows. Today, however, is bad enough: My farm business is now under siege, held hostage by a trade war that my neighbors and I never wanted. Yet US Trade Ambassador Robert Lighthizer says we can’t worry about me, it is the big picture that is important. All I can say to him is that the financial bullets are real, and they hit with real impact on us in agriculture.
To be sure, President Trump isn’t doing anything he said he wouldn’t do. He has talked tough on trade from the moment he announced his candidacy. I supported his election, but also harbored deep reservations about his trade agenda. Now my fears have come to fruition.
My hope is that the president will make good on the promise that he’s a master negotiator. Perhaps he’ll bargain his way out this mess. Many of the new tariffs have yet to take effect. They’ve already shaken markets and taken an economic toll, but they are threats rather than realities. Perhaps a round of productive bargaining will sweep them away.
Yet I’m troubled by the possibility that the opposite will happen. The trade war could escalate, with more tariffs continuing to disrupt the flow of goods and services between the United States and China, driving down my farm’s income ever further.
Then there’s NAFTA. We’re in what could be the final stages of renegotiating America’s most important trade agreement—and it’s still possible for the whole thing to collapse. I don’t want to contemplate that possibility. If we quit NAFTA, the loss will devastate all of American agriculture, no matter what happens in our trade war with China.
For a while, I was optimistic about the future of farming. Although commodity prices have been low, things were looking up, as tax reform led to a temporary boom in the stock market, the regulatory dangers of recent years have vanished, and new technologies continue to fuel innovation.
Now I’m worried. Farmers have said it before and I’ll say it again: There’s no winning a trade war, the bullets are real.
Tim Burrack raises corn, soybeans and pork on a NE Iowa family farm. He serves as Vice-Chairman and volunteers as a Board Member for the Global Farmer Network (www.globalfarmernetwork.org).
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This column first appeared April 4 at The Hill.