OMAHA (DTN) -- Commodity futures took a dive Friday after President Donald Trump announced he was going ahead with $34 billion in tariffs against Chinese technology products with plans to issue tariffs on another $16 billion in products later this summer.
Soybeans, one of the largest U.S. export products to China, saw an early 18- to 19-cent drop in prices for contracts on the CME before rebounding slightly. Wheat futures initially fell 10 cents before rising back a few cents, and corn fell 5 cents a bushel before rallying to positive territory.
The Trump administration announced 25% tariffs 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.
"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."
Further, the White House added 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."
The Chinese Ministry of Commerce responded Friday, stating that China would impose trade barriers of the "same scale and the same strength," the Washington Post reported.
Farm groups had been pushing for the White House to reconsider the tariffs, considering China had put together its own list of $50 billion in retaliatory products for tariffs, including more than $16 billion in U.S. agricultural products. That includes soybeans, which account for roughly $14 billion in export value to China. Farm groups had even generated a social media campaign on Thursday, #TradeNotTariffs.
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, most of which will go into effect on July 6, were added to more than 1,300 lines of products made in China. The main 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.
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 tariff 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."
Sen. Orrin Hatch, R-Utah, chairman of the Senate Finance Committee, which oversees trade, credited President Trump's willingness to confront China, but added that tariffs are "ill-conceived" and would lead to retaliation against farmers and ranchers.
"Tariffs will harm American and Chinese businesses and consumers, and will put economic growth in both countries at risk," Hatch said. "China must take responsibility and act expeditiously to change its policies to avoid the damaging effects of tariffs and escalating retaliation. America's trade strategy must focus on combatting China's discriminatory and market-distorting practices.
"Ill-conceived trade actions that weaken the American economy, alienate allies, and invite retaliation against American businesses, farmers and ranchers, undermine our nation's ability to successfully confront China's unfair trade policies."
Chris Clayton can be reached at Chris.Clayton@dtn.com
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