Ag Hit by Chinese Tariffs

China Responds Against Soybeans, Pork After US Slaps Tariffs on Chinese Technology

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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A Chinese flag flies on a ship stocked with products at the Long Beach (California) Port earlier this year. The U.S. and China accelerated their trade dispute Friday as the Trump administration went ahead with tariffs against Chinese technology. (DTN file photo by Chris Clayton)

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."


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.


"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."


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."


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.


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.

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Chris Clayton