Eyes on China and Tariff Hike

Trade Dispute Between US, China Heightens as President Raises Tariffs

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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A Chinese cargo ship at the Port of Long Beach, a major container port between the U.S. and Asia. Businesses and farmers are watching the escalating trade talks between the U.S. and China, and potential higher tariffs. (DTN file photo by Chris Clayton)

OMAHA (DTN) -- President Donald Trump followed through with a threat and raised tariffs early Friday to 25% on $200 billion of Chinese products. China's Ministry of Commerce responded quickly on Friday that China would retaliate. "The Chinese side deeply regrets (the U.S. actions) and will have to take countermeasures," the Chinese Ministry of Commerce (MOFCOM) said in a statement.

In a round of early tweets, President Trump indicated he was ready to raise tariffs on $325 billion more of Chinese imports. The president also indicated he was willing to support $15 billion in additional trade-aid payments to farmers as well.

The president said talks with China continued "in a very congenial manner -- there is absolutely no need to rush -- as tariffs are NOW being paid to the United States by China of 25% on 250 Billion Dollars worth of goods and products. These massive payments go directly to the Treasury of the U.S..."

He added, "...The process has begun to place additional tariffs at 25% on the remaining 325 Billion Dollars. The U.S. only sells China approximately 100 Billion Dollars of goods and products, a very big imbalance. With the over 100 Billion Dollars in tariffs that we take in, we will buy..."

The president then indicated the billions of tariffs from China would go to buy agricultural products. "...agricultural products from our great farmers, in larger amounts than China ever did, and ship it to poor and starving countries in the form of humanitarian assistance. In the meantime, we will continue to negotiate with China in the hopes that they do not again try to redo deal!"

In another early tweet, the president maintained tariffs would generate wealth for the U.S., and he again said it would be good for U.S. farmers.

"Tariffs will bring in FAR MORE wealth to our country than even a phenomenal deal of the traditional kind. Also, much easier and quicker to do. Our farmers will do better, faster, and starving nations can now be helped. Waivers on some products will be granted, or go to new source!"

The president then suggested more aid for farmers could be on the way.

"...If we bought 15 Billion Dollars of agriculture from our farmers, far more than China buys now, we would have more than 85 Billion Dollars left over for new infrastructure, healthcare, or anything else. China would greatly slow down, and we would automatically speed up!"

Just a few minutes after posting that tweet, the president deleted it from his Twitter feed.

Business groups and farm organizations tried Thursday to curb the possibility of the U.S. imposing higher tariffs on China. Farmers and business groups have largely supported the Trump administration's push to demand China change some of its business practices. Businesses have complained about intellectual property theft and forced transfer of technology.

The tariffs, though, have reduced U.S. agricultural exports to China and caused importers to pass along cost increases to their buyers.

China already has a 25% retaliatory tariff on various agricultural products, including soybeans. Some other products have even higher tariffs, such as pork, which has a 62% tariff imposed by China.

A coalition of business groups called Tariffs Hurt the Heartland highlighted several businesses Thursday that have seen their exports fall or the cost of their imports rise. Brent Bible, a farmer from Lafayette, Indiana, said the profit margins on his 5,000-acre farm have gone away for him and his business partner. Bible said soybeans and corn prices have suffered because of retaliatory tariffs. Bible said the uncertainty in the market just in the past week because of China has affected his income.

"We've seen for our operation a reduction of about $50,000 in value in unpriced crop from this year and unpriced crop that we will produce this summer," Bible said.

Bible added that steel and aluminum tariffs on imports have increased the costs of vehicles and equipment as well.

"We are buying those products at an increased price, and there is no question we are the ones paying the tariff," Bible said.

The uncertainty for farmers over export markets comes as they also face a tougher-than-average year planting a crop. So far, heading into this week, 94%, or 79.5 million acres, of soybeans were unplanted, as were 77% of the corn acreage, or 71.4 million acres, as Farm Bureau's Market Intel highlighted Thursday in a tweet.

John Heisdorffer, an eastern Iowa farmer and chairman of the American Soybean Association, said he has gotten his corn planted but is waiting for warmer weather to plant soybeans. The trade talk keeps elevating and bringing prices lower because of the high soybean stocks.

"It's time for us to have some good news," Heisdorffer said.

"It's tough to go out and put a crop in when you know you are losing money on it."

Trump said Thursday he is more optimistic that a trade deal with China is possible. "I think it'll be a very strong day, frankly," he said. "It was their idea to come back."

Trump later said he had no idea what was going to happen but expressed confidence in the outcome. "We're going to find out about China tonight, and I think you're going to be very impressed."

Trump said Chinese President Xi Jinping wrote him a "beautiful letter" and that he would probably speak to Xi by phone. Trump added though, that his alternative is higher tariffs. "We've taken well over $100 billion from China in a year."

There are signs the trade war may be having one of the president's intended effects. Bloomberg reported that, since December, the U.S. monthly trade deficit with China has declined by roughly $10 billion, according to the Commerce Department.

The Nebraska Farm Bureau on Thursday highlighted how the talk of tariffs and trade disputes hurt Nebraska farmers even before the tariffs were in full swing.

President Trump's threats of tariffs helped lead to nearly $200 million in lower agricultural exports in 2017, Nebraska Farm Bureau stated. Soybean exports fell about $130 million, and corn exports fell $140 million. Those declines in grains offset rising beef and pork exports in Nebraska.

Steven Nelson, president of the Nebraska Farm Bureau, said the report on Nebraska agricultural exports reflects some of the concerns farmers have over trade right now.

"The bottom line is we need to get trade deals done," Nelson said. "We've been talking about this for a long time, and we just need to get some trade deals done."

Nelson was asked if the Trump administration may need to provide another round of trade aid to farmers if more sales are made throughout the new growing season. Nelson said that view did come up at a meeting he attended recently in Washington.

"There will certainly be a push to do that," Nelson said of aid payments. "We certainly would rather get these trade deals done."

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN‏


Chris Clayton