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US and China Engaged in Trade War

Ag sector needs China trade resolution

Legislators urge Trump not to give up on enforceable trade agreement, but deal needed quickly to offer support to farmers.

A prolonged trade war does not benefit China or the U.S. and especially not the agriculture sector, according to those who continue to call for a swift resolution to the ongoing trade dispute between the two nations.

China’s Ministry of Finance announced on Monday that it was raising tariffs on $60 billion of American goods -- a swath of roughly 5,000 products -- in the country’s first move to retaliate over President Donald Trump’s May 10 announcement to increase tariffs on $200 billion of Chinese goods from 10% to 25%. Steps are also being taken for an additional 25% tariff on the remaining $325 billion in annual imports from China.

The finance ministry delayed the implementation of its tariff increase until June 1 -- a delay of nearly three weeks, which allows negotiators time to make another push for a deal. China’s retaliation tariffs of 25% duties -- up from 10% -- will target such products as sweet almonds, frozen fruits and nuts and dried, smoked or salted beef, according to a list compiled by the Agriculture Transportation Coalition. Frozen potatoes, shelled peanuts, chicken breast, ground tomatoes and peanut butter will see tariffs increase from 5% to 10%, the group added.

U.S. financial markets fell sharply in early trading after China announced its tariff increase, with the Dow Jones Industrial Average slumping more than 500 points.

Senate Finance Committee chairman Chuck Grassley (R., Iowa), who oversees trade pact approvals in the Senate, said, “Increasing U.S. tariffs on Chinese products and the retaliatory tariffs from China will hurt both countries. This intensifies the urgency of reaching an agreement as soon as possible to end this trade war. President Trump shouldn’t give up on securing an enforceable agreement that holds China accountable for its abusive trade practices. Stalling, bullying tactics and threats to completely block American products from entering Chinese markets shouldn’t be rewarded.”

Senate Agriculture Committee Chairman Pat Roberts (R., Kan.) said the time is now for a deal with China.

“Times are tough in farm country,” Roberts noted. “American farmers are paying the price for trade uncertainty with China at the same time they are making planting decisions and working in the fields. These negotiations must find a successful conclusion soon so our producers can realize open and reliable markets in China and around the world. 

“It’s time for the U.S. and China to remain at the table and reach the best possible deal. It is essential to focus on what can be done now. A strong U.S.-China trade relationship benefits both countries,” he added.

The American Soybean Assn. (ASA) also voiced ongoing frustration and concern with the inability to get a deal across the finish line.

“The U.S. has been at the table with China 11 times now and still has not closed the deal. What that means for soybean growers is that we’re losing -- losing a valuable market, losing stable pricing, losing an opportunity to support our families and our communities. These trade negotiations are serious for us. Farming is our livelihood,” said ASA president Davie Stephens, a soybean grower from Clinton, Ky.

While ASA said it supports the Administration's overall goals in these negotiations, ASA cannot support continuing and escalating the use of tariffs to achieve them.

“We’ve been understanding during this negotiation process, but we cannot withstand another year in which our most important foreign market continues to slip away and soybean prices are 20-25% -- or even more -- below pre-tariff levels,” said ASA chairman John Heisdorffer, a Keota, Iowa, grower. “The sentiment out in farm country is getting grimmer by the day. Our patience is waning, our finances are suffering and the stress from months of living with the consequences of these tariffs is mounting.”

A statement from the Tariffs Hurt the Heartland coalition added, “The trade war has gone on for far too long, and the costs have grown far too high. The patience of farmers, manufacturers, businesses and consumers is wearing thin. There is no excuse for patience from members of Congress either.

“As we’ve said all along, we support the Administration’s goal of reaching an agreement with China that addresses unfair trading practices. Tariffs are the wrong way to do it, and the proof is growing every day. To put more pressure on China, we need to work with our trading partners across the globe who share our same concerns, deploy creative alternatives to tariffs and look to agreements that set higher standards for trade in Asia, like the Trans-Pacific Partnership,” the coalition said.

The Ohio Soybean Assn. (OSA) also voiced its ongoing stance against the use of tariffs. OSA president and Ross County, Ohio, soybean farmer Scott Metzger said, “This is simply unacceptable. We understand the reasons for bringing China to the negotiating table to address technology transfer and intellectual property issues. However, there are other tactics that can be used to accomplish that without harming farmers and our rural economies.”

“Farmers have been patient and supportive,” added OSA vice president Ryan Rhoades, a farmer from Marion County, Ohio. “That patience is wearing very thin. These are not hypothetical losses we’re talking about; this is real. This is our livelihood and how we support our families, and the ripple effect is going to touch all of rural America.”

Agricultural economists David Widmar and Brent Gloy noted in a recent "Agricultural Economic Insights" post, that without significant government aid or a trade deal, things will get even worse financially for farmers. “Farm incomes are very low.  If the U.S. is forced to go another year with only token Chinese soybean purchases, ending stocks are likely to be beyond burdensome, meaning prices will be very low. On top of that, many other commodities are going to feel the spillover. On top of that, other sectors such as dairy continue to be mired in terrible financial conditions,” they wrote.

Widmar and Gloy added, “The farm economy was already on its knees dealing with low commodity prices, tumbling incomes and high ending stocks. The trade war is making matters much worse. Regardless of all the uncertainty caused by the situation and its handling, many in agriculture will likely have hard financial decisions to make in the coming months.

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