Tag Archives: tariffs

China could ratchet up its trade war tactics against the United States as President Donald Trump has escalated the trade war between the two nations this week.

Politico points out that China knows how to fight a trade war and could go beyond retaliatory tariffs next. China has been known to successfully encourage its 1.4 billion population to give up products from targeted countries, such as Big Macs, and make business harder for U.S. companies in China.

While China has far fewer U.S. imports to impose tariffs on, a trade expert told Politico: “The reality is the Chinese can do quite a bit to hurt U.S. companies in the Chinese market.” Tariffs that have yet to take effect will target U.S. agricultural products. Earlier this week, business and agriculture groups penned a letter to Congress seeking lawmakers involvement to reign in Trump’s trade agenda.

The group asked for congressional oversight, while detailing how Congress has the power to regulate foreign trade.

OMAHA (DTN) — Leaders from the American Soybean Association could only respond in dismay Friday after President Donald Trump announced he was going ahead with $34 billion in tariffs against Chinese technology products because China wasted little time Friday imposing a 25% tariff on U.S. soybeans and other agricultural products.

The Trump administration announced Friday morning that it would place a 25% tariff on goods that contain “industrially significant technologies.” These include products under China’s “Made in China 2025” strategy. The U.S. can no longer tolerate losing technology and intellectual property to unfair economic practices, the White House stated. The administration also said it was preparing tariff lines on another $16 billion in Chinese goods that would be announced later this summer.

“These tariffs are essential to preventing further unfair transfers of American technology and intellectual property to China, which will protect American jobs,” the White House stated. “In addition, they will serve as an initial step toward bringing balance to the trade relationship between the United States and China.”

CHINA’S TARIFFS TO BE IMPOSED

Directing almost equal countermeasures, China’s Ministry of Commerce officials announced early Saturday in China that the country would impose 25% tariffs on $34 billion in U.S. products on July 6 on a range of products, including soybeans, but also products such as pork and chicken, as well as a list of non-agricultural products. Soybeans alone account for about roughly $14 billion in export value to China.

In the same vein as the U.S., China also stated it was preparing another round of 25% tariffs on $16 billion in U.S. products that would include chemicals, medical equipment and energy products.

The White House had stated Friday that the U.S. would pursue additional tariffs if China retaliates, “such as imposing new tariffs on United States goods, services, or agricultural products; raising non-tariff barriers; or taking punitive actions against American exporters or American companies operating in China.”

Even before China made its official announcement, commodity futures fell sharply for grains and oilseeds, though corn and wheat contracts rallied to reflect more modest daily losses. Soybeans, one of the largest U.S. export products to China, saw an early 21 3/4-cent drop in the July contract to $9.05 on the CME. The November contract fell 19 1/2 cents to $9.30. DTN’s National Soybean Index closed at $8.64 Thursday, priced 63 cents below the July contract and at its lowest price in 10 months.

Agriculture Secretary Sonny Perdue held a press call late Friday largely to talk about his trip to Canada, but he also got multiple questions about how USDA would respond to the Chinese tariffs and whether he was ready to tap into as much as $15 billion in Commodity Credit Corp. funds to help farmers. Perdue said it was important to see how the price situation plays out for farmers rather than looking at daily market fluctuations.

SEE HOW MARKET PRICES PLAY OUT

“You can’t demonstrate any damage on the day that tariffs are announced,” Perdue said. “We’re going to look at this very carefully. We’re going to calculate — we have been calculating market impact on a weekly basis on a number of months now, frankly … When we determine and if we determine there is legitimate and lasting market impact, based on market disruption of tariffs and retaliation, then we’re prepared to take action.”

The American Soybean Association used words such as “distraught” and “devastating” to express the group’s frustration, after the group twice sought meetings with Trump to highlight ways that boosting soybean exports to China could be part of a trade solution rather than resorting to tariffs. Instead, the group noted a “new anxiety” for soybean growers.

“As a soy grower, I depend on trade with China,” said Davie Stephens, vice president of ASA and a Kentucky farmer. “China imports roughly 60% of total U.S. soybean exports, representing nearly one in three rows of harvested soybeans. This is a vital and robust market that soy growers have spent over 40 years building and, frankly, it’s not a market U.S. soybean farmers can afford to lose.”

FARM BUREAU ANALYSIS

The Nebraska Farm Bureau stated its own preliminary analysis showed in 2016 that China added $2.29 per bushel of soybeans for Nebraska farmers, as well as $3.82 per head of pork and $26.36 for beef, just based on hides and skins value. On a per farm basis, China trade added an average of $16,600 per farm in Nebraska, though the value was much higher in some counties.

“While the entirety of the U.S.-China trading relationship won’t disappear overnight, these actions will have significant consequences, which have the potential to greatly damage farm and ranch families for years to come,” said Steve Nelson, president of the Nebraska Farm Bureau.

Tom Sleight, president and CEO of the U.S. Grains Council, noted that China and the U.S. have been doing this tit-for-tat since at least 2010. The U.S. has been hit with trade actions by China against sorghum, ethanol, corn and dried distillers grains. But Sleight added he is concerned tariffs will continue to open markets to other competitors at the expense of U.S. farmers. “Bottom line: Tariff battles are never productive.”

ALARM SOUNDED

Tom Donohue, president and CEO of the U.S. Chamber of Commerce, criticized the White House action in a statement, saying the Chamber has sought to sound the alarm against such actions.

“Imposing tariffs places the cost of China’s unfair trade practices squarely on the shoulders of American consumers, manufacturers, farmers, and ranchers,” Donohue said. “This is not the right approach.”

The U.S. tariffs were added to more than 1,300 tariff lines of products made in China, most of which will go into effect on July 6. The main tariff line of products, valued at roughly $34 billion, involved industries such as aerospace, information technology, robotics, industrial machinery, new materials and automobiles. Another set of products, valued at $16 billion, will undergo review and public comments before tariffs would be issued on those as well.

The Association of Equipment Manufacturers said Friday the tariffs jeopardized the industry because China constructs different types of construction and agricultural equipment. The tariffs affect U.S. companies importing equipment that is added to U.S. machinery.

“Given depressed U.S. farm incomes, the move is expected to disproportionately hurt America’s rural economy,” the group stated.

TAX ON LIVELIHOODS

Brian Kuehl, executive director of Farmers for Free Trade, a group set up to tout NAFTA and avoid trade disruption, said the White House move is “downright scary. It’s no longer a negotiating tactic, it’s a tax on their livelihoods. Within days, soybean, corn, wheat and other American farmers are likely to be hit with retaliatory tariffs of up to 25% on exports that keep their operations afloat. When they do, they’re not going to remain silent.”

Kuehl added that the tariffs are not only a loss for U.S. farmers, but a win for U.S. export competitors. “When American soybeans and corn become more expensive, South America wins. When beef becomes more expensive, Australia wins,” Kuehl said. “As this trade war drags on, farmers will rightly question why our competitors are winning while we’re losing.”

Ohio State University released a report Wednesday stating farmers in that state “could lose more than half of his or her annual net income” due to Chinese tariffs.

Farmers for Free Trade Executive Director Brian Kuehl  says the Trump Administration’s approval of $50 billion worth of imported goods from China is “scary.” The tariffs on Chinese imports will result in heavy retaliatory tariffs on U.S. agricultural exports. “For American farmers, this isn’t theatrical anymore, it’s scary,” Kuehl says. “It’s no longer a negotiating tactic, it’s a tax on their livelihoods.

Within days, soybean, corn, wheat, and other American farmers to be hit with retaliatory tariffs of up to 25 percent on the exports that keep their operations afloat. When they do, they aren’t going to remain silent.” Farmers for Free Trade says these tariffs are not only a blow to U.S. farmers, it’s a win for our competitors. When American corn and soybeans become more expensive, South America wins.

When American beef becomes more expensive, Australia wins. As this trade war drags on, the group says farmers will rightly question why U.S. competitors are winning while American farmers are losing. Kuehl adds, “Farmers for Free Trade will continue to hold town hall meetings across the country this summer to ensure that farmers voices are being heard. The message will be heard loud and clear. American farmers demand that elected officials support them by ending this trade war.”

Farmers for Free Trade Executive Director Brian Kuehl (Keel) says the Trump Administration’s approval of $50 billion worth of imported goods from China is “scary.”

The tariffs on Chinese imports will result in heavy retaliatory tariffs negotiating tactic, it’s a tax on their livelihoods. Within days, soybean, corn, wheat, and other American farmers are likely to be hit with retaliatory tariffs of up to 25 percent on the exports that keep their operations afloat. When they do, they aren’t going to remain silent.”

Farmers for Free Trade says these tariffs are not only a blow to U.S. farmers, it’s a win for our competitors. When American corn and soybeans become more expensive, South America wins. When American beef becomes more expensive, Australia wins. As this trade war drags on, the group says farmers will rightly question why U.S. competitors are winning while American farmers are losing.

Kuehl adds, “Farmers for Free Trade will continue to hold town hall meetings across the country this summer to ensure that farmers voices are being heard. The message will be heard loud and clear. American farmers demand that elected officials support them by ending this trade war.”

The White House announced today that it’s moving forward with 25 percent tariffs on up to $50 billion of Chinese products imported into the U.S. China responded in-kind, saying it will move swiftly to protect its interests. The speculation is Beijing will retaliate by imposing tariffs of its own on $50 billion in American exports, including agricultural products. Iowa Soybean Association President Bill Shipley of Nodaway released the following statement:

“The use of food as a weapon in trade disputes is of grave concern to Iowa and U.S. farmers. It threatens the security and stability of the people and economies of China and the United States, including millions of U.S. farm families.

“There are no winners in a trade war and one that includes soybeans will not start or end well. U.S. soybean prices have already plummeted by about $1 per bushel since the beginning of June. Prices will likely drop further should the tariffs be imposed. This will further pressure agricultural families and businesses already struggling with below break-even commodity prices. Duties on imported soybeans will also negatively impact China’s soy processors, animal and aquaculture producers and its people.

“An ongoing trade dispute with China risks stoking anti-Americanism sentiment that could jeopardize the strength of trade relations between the two countries that have taken U.S. soybean farmers nearly 35 years to develop.

“Iowa soybean farmers recognize the legitimate trade issues involving China and the U.S. We’re also keenly aware of the trade imbalance that exists between the two countries. China consumes nearly 62 percent of all soybeans traded globally. Approximately 33 percent of total U.S. soybean production is destined for China, fulfilling almost 40 percent of China’s total soybean imports. Ironically, U.S. soybean and agriculture can help improve the trade imbalance by increasing sales to China. This is a much better course of action than suspending sales.

“Farmers are resilient, resourceful and used to dealing with situations out of their control. The best way to counteract negative financial impacts of tariffs is to go on offense. The Iowa Soybean Association will continue to work with partners to build demand both here and abroad, find more efficient ways to export our product and ensure policies and regulations are fair and workable for farmers.”

 

Not funded by the soybean checkoff

As new tariffs on steel and aluminum imports go into effect for some of the United States’ closest allies, the U.S. grains industry is watching closely for retaliations that impact sales of U.S. corn, sorghum, barley and their related products, including ethanol and distiller’s dried grains with solubles (DDGS).

U.S. Commerce Secretary Wilbur Ross confirmed on Thursday that discussions to continue extensions of tariff waivers for Mexico, Canada and the European Union – three of the largest markets for U.S. grains and related products – had failed. As of June 1, they will join a large group of countries facing new tariffs of 10 percent on aluminum imports and 25 percent on steel imports, applied under Section 232 of U.S. trade law.

At press time, it appeared neither Mexico nor Canada had added feed grains or ethanol to their initial retaliation lists, though it is expected those lists will evolve as trade tensions ramp up. The European Union previously announced its countermeasures would include a 25 percent tariff on both U.S. feed and sweet corn, which is largely blocked due to biotechnology concerns. Several other U.S. agricultural products were implicated, including some pork products going to Mexico and a variety of specialty crops. Yogurt and various prepared foods were among the agricultural and food products targeted by Canada.

“Based on information we have heard from our customers and past experience, we have every reason to believe U.S. agriculture, including the products we represent, will be among the most vulnerable to countermeasures from our trading partners,” said U.S. Grains Council President and CEO Tom Sleight in a statement.

“We had strong hopes this situation would be averted permanently, but it now appears we need to prepare for retaliation and its direct impact U.S. farmers. Our global staff is doing this to the best of their abilities as we continue to follow new developments.”

Many countries are already facing the new tariffs, which initially went into effect in March. Those include China, which on April 2 counter-imposed tariffs of 15 percent on imported U.S. ethanol and 25 percent on imported U.S. pork. Japan, Turkey, Russia and India also face the tariffs and have said they would retaliate but have not issued lists or their lists did not include U.S. grain products. Quota agreements on steel and aluminum to stave off tariffs have been reached with South Korea, Australia, Argentina and, tentatively, Brazil.

The Section 232 tariffs are in addition to tariffs proposed under Section 301 of U.S. trade law, particularly targeted at China, and a plethora of other trade policy issues, negotiations and concerns.

For the latest, follow the Council here.

Sources close to the White House tell Bloomberg that President Donald Trump backed off imposing billions of dollars in tariffs on Chinese goods because of discord within the administration.

There’s also concern within the White House over the possibility of harming negotiations with North Korea. Trump also reportedly succumbed to pressure from farm-state Republicans, who heavily lobbied the administration to settle its differences with China, which had threatened to levy its own tariffs on American agricultural imports.

Treasury Secretary Steven Mnuchin  said over the weekend that the administration’s plan to impose tariffs on Chinese goods has been suspended. However, former Trump chief strategist Steve Bannon told Bloomberg the deal was “capitulation.” Some White House officials say the retreat on tariffs is a result of discord on Trump’s economic team.

Bloomberg says divisions are raw between free trade supporters like Mnuchin and White House Economic Adviser Larry Kudlow and the China hawks led by White House trade adviser Peter Navarro. Mnuchin and Navarro were said to have argued over China policy during a trip to Beijing earlier this month, and Navarro wasn’t as deeply involved during negotiations last week with a Chinese delegation that made a trip to Washington, D.C.