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Local farming groups hope trade deal can stop dueling tariffs

Local farming groups hope trade deal can stop dueling tariffs

April 15th, 2018 by Philip Joens in Local News

As the impending trade war between the United States and China escalates, farming groups in Missouri hope a last-minute deal can stop dueling tariffs from taking effect.

During the past month, the United States announced tariffs on Chinese steel and technology. China retaliated by placing tariffs on items like U.S. pork, soybeans and other commodities. Now, farming groups said they hope the trade battle can be resolved without leaving farmers stuck in the middle.

President Donald Trump announced steel and aluminum tariffs March 8 designed to protect U.S. producers. Some of the United States' largest trading partners received exemptions from the steel and aluminum tariffs, but not China. Beijing responded by releasing a list of $3 billion worth of U.S. goods including pork, recycled aluminum and ethanol that could be subject to import tariffs ranging from 15-25 percent.

The brewing trade war intensified March 22, when Trump instructed the U.S. to impose tariffs on approximately $60 billion worth of Chinese goods. This round of tariffs targeted items like flat-screen TVs, medical products and bookbinding machines because the U.S. claimed China obtained trade secrets for U.S. companies through forced technology transfers. China responded by announcing plans April 4 to impose a 25 percent tariff on 106 U.S. products worth $50 billion including soybeans and beef.

Before the U.S. tariffs take effect, the Office of the U.S. Trade Representative said it would hold a public hearing May 15. Public comments will be accepted until May 22.

Missouri Farm Bureau Blake Hurst remained cautiously optimistic something will be worked out to stop implementation of the tariffs during the public comment period.

"We have some time," Hurst said. "At least 60 days, probably longer. We have to assume negotiations are going on with the Chinese government that will be successful."

Missouri's soybean industry could be particularly vulnerable to Chinese tariffs. Each year, the U.S. exports $14 billion worth of soybeans, and about 25 percent end up in China. Soybean exports made up about 23 percent of Missouri commodities exports and had a value of $2 billion in 2016, according to the Missouri Department of Agriculture.

U.S. companies previously complained to the World Trade Organization about Chinese technology-transfer requirements. Hurst said the U.S. can use this as a bargaining chip in negotiations.

Missouri farmers get 20 percent of their income from exports, according to the Missouri Farm Bureau. Also, agriculture industries in Missouri contributed $88 billion to the state's economy in 2016, according to the Missouri Department of Agriculture.

Missouri Soybean Association President Brooks Hurst, nephew of Blake Hurst, said in a news release last week farmers should not be penalized because of threats to the tech industry. If China places tariffs on U.S. soybeans, it poses a grave threat to Missouri farmers, Brooks Hurst said.

"Farmers have invested significantly in developing their international markets for soybean, including China, and should not bear the brunt of discord on China's policies on intellectual property and information technology," Brooks Hurst said in a news release.

Blake Hurst, of Missouri Farm Bureau, said it's probably too early to speculate how tariffs could affect fall futures prices. Futures markets plunged when the tariffs were announced but have since bounced back.

If Beijing follows through with the tariffs on U.S. soybeans, it could buy soybeans from Brazil, which is forecast to have a record soybean crop of 115 million tons. Blake Hurst said this would put downward pressure on prices but some losses would be made up by gains from other countries.

"Some of those exports would be made up by countries that had traditionally purchased soybeans from Brazil and Argentina," Blake Hurst said. "So we wouldn't see an overall loss that's as big as our loss in exports to China."

In 2016, Missouri exported 3 million hogs, totaling $882.6 million. The U.S. exported $1.1 billion worth of pork to China in 2017, making it the No. 3 export market for U.S. pork.

Missouri Pork Association Executive Director Don Nikodim said China is a big market but not the only market for U.S. pork worldwide.

"Just because they have a tariff doesn't mean they're going to stop buying," Nikodim said.

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Missouri exported 1.9 million head of cattle in 2016, according to the Missouri Department of Agriculture. South Korea is the largest buyer of imported U.S. beef, while Japan is the second largest. Last summer, U.S. cattle farmers also began exporting beef to China after a 13-year ban.

Missouri Cattlemen's Association President Mike Deering thought in late March that Chinese tariffs would not harm cattle farmers beyond trickle-down effects from other ag tariffs. Given it's a new market for U.S. farmers, it surprised Deering Bejing placed tariffs on U.S. beef.

In the short term, the impact on Missouri cattle farmers should be minimal, Deering said. Cattle farmers hoped China would one day become a critical market, though.

"The middle-class population is bigger than our entire population," Deering said. "The market is a new one, and we certainly want to keep it open."

Last year, the U.S. pulled out of the Trans-Pacific Partnership, which farmers hoped would open new markets and increase trade between the U.S. and 11 other countries. Trump appeared to open the door to reverse the 2017 decision Thursday by indicating on Twitter the U.S. could rejoin the TPP if it can get a better deal than it previously negotiated.

Blake Hurst and Deering hope the U.S. rejoins the TPP and the tariffs are dropped. If one or both don't happen, Deering hopes for the best result farmers can get by striking individual trade-agreements with each country.

"Japan is a critical market," Deering said "We're OK with bilateral trade agreements."