Chinese importers have already stopped buying U.S. wheat, soybean purchases are expected to drop even further, and the U.S. ag sector is expecting the financial pain to increase exponentially as long as the Trump administration persists in a trade war with China.
That trade war took a major step forward at 12:01 a.m. Friday morning as the U.S. officially began levying new tariffs on $34 billion worth of Chinese goods in President Donald Trump’s effort to stop China from taking U.S. intellectual property as well as reduce the U.S. trade deficit. China responded with new tariffs on $34 billion worth of U.S. goods – mostly a wide range of U.S. agricultural products, ranging from soybeans to cucumbers.
“Unable to accept the risk of escalating import prices, Chinese customers stopped making new purchases of U.S. wheat last March, after the Chinese government threatened a 25 percent import tariff on U.S. wheat in retaliation to the threat of U.S. tariffs on Chinese imports,” the U.S. Wheat Associates and the National Association of Wheat Growers said in a joint statement today. “The exchange of punitive tariffs between Washington and Beijing today represents the next phase of what could be a long and difficult struggle that will likely inflict more pain before we reach an unknown resolution.”
Soybean farmers are expected to be hit especially hard as China’s new 25 percent tariff goes into effect. The U.S. sells about $14 billion worth of soybeans to China yearly – roughly one of every three rows planted in the U.S. – and American Soybean Association President John Heisdorffer said today he expects to lose a significant percentage of that market if the trade war persists.
Likely in an effort to avoid the new 25 percent tariff, Chinese importers cancelled in late June purchases of 366,000 metric tons of soybeans for the 2017-18 marketing year, according to the latest U.S. Export Sales Report that the USDA released today. The Chinese also cancelled purchases of 66,000 tons for 2018-19 delivery.
But the pain will go far beyond the soybean fields of America. Several mayors in cities along the Mississippi River addressed reporters today to stress that the Chinese tariffs will cause job losses, hurt revenues and force businesses to shut down from Minnesota all the way down to Louisiana.
“$30.7 million worth of soybean exports from Iowa to China are threatened by the newest round of tariffs,” said Frank Klipsch, Mayor of Davenport, Iowa. “My state ranks second in U.S. soybean production, with soybeans making up 37 percent of total Iowa crop production. The largest single employer in my area is manufacturing for the agriculture industry.”
China now buys roughly 30 percent of all the soybeans produced in the U.S., and a recent study out of Purdue University predicts Chinese tariffs would result in a 65 percent cut in U.S. exports.
That means there will be a lot fewer barges on the Mississippi River and less need for employees that work on the 15 grain elevators in Grafton, Ill., said Grafton mayor Rick Eberlin.
Both Eberlin and Klipsch are members of the Mississippi River Cities & Towns Initiative, a group of 85 mayors that work to sustain the $500 billion of annual revenue generated on the waterway and the 1.5 million jobs directly supported by river commerce.
(This story corrects the percentage of soybeans China buys from the U.S.)
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