U.S, China trade tariffs could challenge local farmersApril 9, 2018
By LEANN BURKE
When the United States engages in trade disputes, agriculture tends to not come out on top.
That’s knowledge Dennis Whitsitt has gained from his years as a grain and beef cattle farmer in Dale, and it has him worried as trade disputes between the U.S. and China heat up.
He’s not the only one. Ernie Brames, a hog and grain farmer near the 4-H Fairgrounds, has already seen the price of his hogs decrease due to the disputes, and he expects soybeans to be hit next.
“We don’t really know how this is all going to turn out,” Brames said. “That puts a lot of fear in everybody.”
The trade dispute began with a U.S. belief that China has been engaging in unfair trade practices as it pursues “Made In China 2025,” a plan to dominate cutting-edge industries.
In 2017, the Trump administration ran two investigations into Chinese trade practices: one on whether imports of foreign steel, of which China is a supplier, could be a threat to national security, and the other specifically into possible unfair trade practices by China such as theft of intellectual property.
The second investigation found that Chinese theft of intellectual property costs the U.S. “between $225 billion and $600 billion” annually, CNN reported.
Tariffs and threats of tariffs by both the U.S. and China, the world’s two largest economies, began in January.
The Trump administration imposed tariffs on solar panels, most of which come from China, and large residential washing machines. In March, the U.S. imposed tariffs on foreign produced steel and aluminum.
Then, China hit back, and that’s where the farmers come in.
On April 2, China imposed tariffs on U.S. imports worth around $3 billion, including pork. Those tariffs shifted the 2018 outlook on pork from modest gains to a loss.
Last year, China imported 9 percent of U.S. pork exports, totalling about $1.1 billion in pork. This year, due to the tariffs, economists speculate that China will instead import more pork from the European Union and Canada.
According to a study by Purdue University professor of agricultural economics Chris Hurt, that shift in the global market could drop U.S. pork prices up to 4.4 percent. While the price drop would help pork farmers sell more domestically and in other countries, Hurt’s study didn’t expect the increased sales to fill the gap left by China.
For Brames, the trade dispute makes it difficult to predict what future years will hold. He’s used to there being good and bad years in farming due to supply and demand, but when the government gets involved and international trade is disrupted, supply and demand rules don’t apply as cleanly.
“When the government gets involved, that puts a new spin on it, and that’s scary,” Brames said.
He also worries about how the trade dispute will affect the future. At age 72, the lifelong farmer has seen his share of international trade disputes and what he calls “brash presidents,” and he knows that once you lose buyers, it takes years to gain them back.
“Our ag leaders tried to talk (Trump) out of (the tariffs), but he didn’t listen,” Brames said.
Going forward, the trade dispute could continue to disrupt agriculture, particularly in Indiana.
In response to the tariffs China imposed earlier this month, the U.S. proposed tariffs on electronics. China responded by proposing tariffs on U.S. cars, chemicals and soybeans, the latter of which is a major product for Indiana.
China imports 62 percent of U.S. soybean exports. A Purdue study found that a 10 percent tariff on soybeans would drop soybean exports to China by 33 percent and total U.S. soybean production by 8 percent. A 30 percent tariff, the study found, would drop exports to China by 71 percent and U.S. soybean production by 17 percent. The study estimated annual loss to U.S. economic well-being between $1.7 and $3.3 billion, depending on how high a tariff is imposed.
“If (the trade disputes) continue for a long time, it will be a challenge for some of the farmers,” said Ken Eck, the agriculture and natural resources educator with the Dubois County Purdue Extension.
For southwest Indiana, the tariffs could have a large effect. Whitsitt, who farms soybeans, said most soybeans produced in the region are exported, thanks to the proximity to the Ohio River. Usually, that’s an asset. But when trade disputes heat up, it can be detrimental because any decline in exports will have a direct impact on the area, he said.
“We need to kind of wait and see what the final outcome is going to be,” he said.
He said he’s “certainly worried.”
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