What was called “sabre rattling” last week has advanced to a full out fencing match between the U.S. and China. Both countries are trading attacks and parries with tariffs. In the most recent engagement, beef, corn, and soybeans have been touched.
On April 4, the Chinese Ministry of Commerce announced proposed retaliatory tariffs against U.S. products. The estimates—from both the U.S. government and related industry sources, and the Chinese government—value the proposed tariffs at $50 billion total and $16.5 billion for agricultural products.
The Chinese action was in response to the U.S.’ announcement the day before of 25 percent tariffs on an estimated $50 billion in Chinese imports. These items included products from “aerospace, information and communication technology, robotics, and machinery,” according to the Office of the U.S. Trade Representative (USTR) announcement.
This U.S. announcement followed the April 2 implementation of China’s proposed tariffs on $3 billion worth of U.S. imports, including pork, as reported in last week’s issue of WLJ.
“It is unsettling to see American-produced beef listed as a target for retaliation,” said National Cattlemen’s Beef Association’s Director of International Trade and Market Access, Kent Bacus, in a prepared statement.
“Sadly, we are not surprised, as this is an inevitable outcome of any trade war. This is a battle between two governments, and the unfortunate casualties will be America’s cattlemen and women and our consumers in China.”
The Chinese announcement did not state when the proposed tariffs would be implemented. However, it implied the tariffs would follow the U.S.’ implementation of its proposed tariffs. Consideration of those proposed tariffs will end at the end of May.
Stakeholders are invited to comment on the proposed U.S. tariffs against China. The USTR said it prefers electronic written comments submitted to regulations.gov. Search for Docket ID USTR-2018-0005. Public comments are due by May 11.
What’s at stake
Soybeans topped the list of proposed targets of the most recent Chinese tariff proposals. Other targets included corn, cotton, sorghum, distillers’ grains, wheat, and every form of beef and beef variety meat currently accepted by China. All products targeted would get an addition 25 percent on top of existing tariffs. The proposed tariff on beef would jump to 37 percent.
“China is a promising market for U.S. beef, and, since the June 2017 reopening, the U.S. industry has made an exceptional effort to provide customers with high-quality beef at an affordable price,” said U.S. Meat Export Federation President and CEO Dan Halstrom.
“In the second half of 2017, following the market reopening, U.S. beef exports to China totaled 3,020 metric tons valued at $31 million. In January 2018, exports reached the highest monthly volume to date at 819 metric tons, valued at $7.5 million.”
“Regardless of final implementation of the proposed tariffs, the market is in a massively negative response,” commented Andrew Gottschalk of Hedgers Edge on April 4 of the market impact of the proposed Chinese tariffs.
“The amount of protein (increasing over last year) has traders concerned that there will simply be an oversupply and that lower prices will be required. Any impediment to exports and non-domestic consumption will only add to the ‘at-home’ supply.”
The potential tariffs on soybeans and corn are also of concern to U.S. farmers. China is a large consumer of U.S soybeans and these new tariffs on soybeans would jump to 28 percent. Corn and corn flour, depending upon in- or out-of-quota status, would range from 26-90 percent.
As mentioned, the earlier proposed Chinese tariff on U.S. pork and pork variety meats was implemented last week. This brings total Chinese tariffs on U.S. pork to 37-45 percent depending on type. China consumes about 6 percent of U.S. exports of pork muscle cuts, and roughly a third of exported pork variety meat.
Frustrated farmers
“I’ve said it numerous times: Threats to demand are not good business when you continue to increase supplies,” said DTN Senior Analyst Darin Newsom on April 4. “And now we find ourselves in what looks to be a full-blown trade war.”
President Donald Trump has objected to the idea of the tariff threats as a trade war, instead framing them as necessary to protect U.S. technology and intellectual property rights. On April 4, he took to Twitter, saying:
“We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S. Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!”
According to U.S. census data on foreign trade, Trump’s $500 billion deficit claim is not correct. In 2017, the U.S. had a $337.18 billion deficit with China in the value of goods and services. A factcheck by the Associated Press said that “it’s not clear where Trump gets his figure of $300 billion, though it may be a plausible estimate.”
However, agricultural leaders around the country have voiced frustration at being targeted by China, apparently as a result of Trump’s actions.
“We’re not helping our farmers at all right now,” Alan Kemper—former president of both the American Soybean Association and National Corn Growers Association and current Indiana farmer—told DTN on April 4. “It just kind of burns me that one person’s voice can overstep all of our gains in a breath or two.”
“It’s not surprising that China retaliated through agricultural tariffs. The U.S. truly feeds the world, and exports are an important market for farmers,” said JanLee Rowlett, government relations manager for the Iowa Cattlemen’s Association.
After noting that farmers, ranchers, and rural residents overwhelmingly supported Trump’s bid for the presidency, South Dakota Farmers Union President, Doug Sombke, said, “The farm economy is bad, really bad right now. Farmers are going backwards fast. We need this administration to stop developing policies and strategies that create economic pain for our family farmers and ranchers and their rural communities.” — Kerry Halladay, WLJ editor
After WLJ went to press on April 5, President Trump proposed an additional $100 billion in retaliatory tariffs against China.
“In light of China’s unfair retaliation, I have instructed the USTR to consider whether $100 billion of additional tariffs would be appropriate under section 301 and, if so, to identify the products upon which to impose such tariffs,” Trump said in an official White House statement. “I have also instructed the Secretary of Agriculture, with the support of other members of my Cabinet, to use his broad authority to implement a plan to protect our farmers and agricultural interests.”
If enacted, this would add to the previously-proposed $50 billion in tariffs against Chinese imports, bringing the total to $150 billion.
China quickly responded, with a spokesman from the Chinese Ministry of Commerce saying: “[We] will follow suit to the end and will not hesitate to pay any price and will definitely fight back. It must take a new comprehensive response and firmly defend the interests of the country and the people.”
This story will be followed by WLJ as it continues.
