Just a few short weeks ago, the Trump administration predicted an agreement was in the offing with China that would end the ruinous trade war between the two countries.
But the deal fell through and the president decided to slap 10% in additional tariffs on Chinese goods imported into the U.S. China immediately announced it would suspend all agricultural imports from the U.S., dealing a “body blow” to the American farm economy.
Feeding China’s growing appetite has meant big business for the U.S. farm economy. China was one of the biggest export destinations for U.S. agricultural commodities from 2009 to 2017 alongside Canada and Mexico, according to the U.S. Department of Agriculture. In 2017, Chinese buyers imported $19.5 billion in farm goods.
That dropped to $9.1 billion last year as China’s tariffs on U.S. soybeans, pork, milk and other products made them more expensive for importers there, prompting some to seek alternatives and scale back imports from the U.S. Over the first six months of this year, China’s agricultural imports from the U.S. were down 20% from the same period last year.
Given the scale of China’s agricultural imports, it would be hard for U.S. farmers to make up for those sales even with much higher exports to other nations, economists say.
Last year, the administration subsidized U.S. farmers to the tune of more than $10 billion. This year, payouts to farmers will top $14 billion.
But farmers say it’s not enough.
Jim Mulhern, chief executive of the National Milk Producers Federation, said dairy exports to China have dropped 54% so far this year. “Any step away from an agreement that further escalates tensions puts recovery of these sales further out of reach,” he said.
The trade battle is also hurting agribusinesses. Research firm Trade Partnership Worldwide LLC in February projected that tariffs on U.S. exports could cost the country’s agricultural sector 59,000 to 71,000 jobs over the next two years.
Cargill Inc. cited the dispute last month when the Minnesota-based company reported a 67% drop in quarterly profits. Archer Daniels Midland Co. , after reporting a 58.5% decline in quarterly earnings last week, warned that China is becoming more comfortable buying food elsewhere, recently approving poultry imports from Russia and pork shipments from Argentina.
Has the trade war been a bust? Not entirely. The basis of the latest negotiations took into account some of China’s unfair trade practices, including currency manipulation. And make no mistake about it; China is suffering too.
But China has a command economy and their political leaders are unmoved by importuning from citizens. Trump is under pressure from farm-state Republicans to do something about the trade war and his re-election may depend on the continued goodwill of farmers.
There may be a point soon where Trump’s efforts will have diminishing returns and he will be under more pressure to strike a deal. Until then, there isn’t much American farmers can do.
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