U.S. grain and oilseed farmers, specialty crop growers and pork producers are hoping that China and U.S. leadership pull back their reins on the potential for a full blown trade war that could cripple U.S. gross domestic product.
The POTUS initiated the hostilities in the name of national security by imposing tariffs of 25 percent on Chinese steel and 10 percent on Chinese aluminum.
But the tariffs have apparently opened Pandora's Box, sparking a flurry of Chinese retaliatory tariffs on a wide range of U.S. agricultural products. Beijing raised tariffs on pork, aluminum scrap and some other products by 25 percent and 15 percent tariffs have been imposed on U.S. apples and almonds.
It's a little surprising that China targeted U.S. pork. Yes, the Chinese produce about half the world's pork supply, mostly in rural backyard operations.
But with more of its population moving into urban centers, China is in the process of moving toward large scale animal operations and has become the world's largest importer of pork while building the needed infrastructure. It's a five-year plan.
So China's strategy on U.S. pork is unclear. The Chinese tariffs will ironically also hurt U.S. based Smithfield Foods, which is owned by China's WH Group.
Unfortunately for U.S. pork producers, it's more likely the trade war is quickly escalating.
The POTUS and the Office of the Trade Representative Tuesday doubled down on the steel/aluminum tariff threat, targeting roughly 1,300 Chinese medical, transport and industrial technology products to send a message to Beijing – stop stealing U.S. intellectual property.
China's response was swift and brutal to U.S. agricultural interests, today announcing 25 percent tariffs on U.S. soybeans, as well as cars and airplanes. In total, the latest Chinese tariffs will cover 106 categories and are worth – are you paying attention America – $50 billion dollars.
No one knows where all this is going, and if they say they do take it with a huge grain of salt.
At this point the U.S. is slow rolling its tariff threat.
The Office of the United States Trade Representative will publish the proposed punitive tariffs in the Federal Register and open a 30-day public comment period. The federal office also says it will give China a 60-day window before the tariffs take effect.
I expect there will be serious dialog over the next two months, but if talks go poorly, as it stands right now, American agriculture will be a huge loser.
China imported some $12.3 billion worth of U.S. soybeans last year.
In the short term, China will try to turn to Brazil's massive bin busting soybean crop to fill the gap. The March World Supply and Demand Estimates put Brazil's soy at 113 million tons.
However complicating China's soybean supply line is a severe drought in Argentina; the nation has less than 7 million tons of soybeans to export – its smallest total in a decade.
China could also draw soybeans from the government's emergency strategic reserves.
Would this be effective? Only China knows for sure as it does not publish how many tons are in it.
China could also attempt to change the mix of ingredients that go into feed. But that may be easier said than done.
Adding more dried distillers grain is a possibility, but China already has stiff tariffs in place on DDGs.
Ultimately the threat against U.S. pork and soybeans is an attempt to hurt the POTUS by inflicting pain on the base that got him elected.
The next 60 days will be crucial to U.S. ag interests.
About Dave Dickey
Dickey spent nearly 30 years at University of Illinois at Urbana-Champaign’s NPR member station WILL-AM 580 where he won a dozen Associated Press awards for his reporting. For 13 years, he directed Illinois Public Media’s agriculture programming. His weekly column for Big Ag Watch covers agriculture and related issues including politics, government, environment and labor. Email him at firstname.lastname@example.org.
This column reflects the writer’s own opinions and not those of Big Ag Watch.