President Trump's plan to levy 25% tariffs on $50 billion worth of Chinese high-tech goods starting July 6 prompted a retaliatory announcement Saturday that China will do the same to a list of 545 U.S. agricultural commodities worth $34 billion, according to Bloomberg. China's Ministry of Commerce also announced it was scrapping its May agreement to purchase an unspecified amount of U.S. agricultural goods and other products.
According to Food Business News, the impending 25% Chinese tariffs on U.S. soybeans, wheat, corn, beef, pork, poultry, seafood and other products could have a long-term impact on farmers. "A recent study by Purdue University economists predicts that soybean exports to China could drop by a whopping 65% if China imposes a 25% tariff on U.S. soybeans," Davie Stephens, vice-president of the American Soybean Association and a Kentucky soybean grower, told Food Business News.
Trump said the U.S. could consider additional tariffs if China retaliates. He said the taxes are necessary to prevent unfair transfers of American technology and intellectual property to China, Food Business News reported.
The latest tariff skirmish between the U.S. and China promises to have serious agricultural impacts as orders are canceled, traffic slows and growers scramble to find customers in other countries to purchase their crops. The situation has pushed down grain market prices and left producers anxious about what will happen next. It could also lead to supply and demand issues as farmers plant their crops based on prices and what long-term consumption looks trends look like.
For U.S. customers, the tariffs could end up having a salutary effect as agricultural products normally destined for China pile up and have to be diverted elsewhere. U.S. manufacturers using soybeans, wheat and corn in their products could see ingredient costs fall and perhaps result in lower prices on the retail shelf, thereby boosting sales.
But before a domestic scenario like that occurs, experts predict China will come calling again for U.S. soybeans. That's because other large producers, such as Brazil, won't be able to supply as much as the Asian country needs to feed its pork industry. At the same time, U.S. soybean growers have other customers to turn to, including the European Union and Argentina.
Meanwhile, soda and beer manufacturers and others have been lobbying the Trump administration to reconsider tariffs on steel and aluminum imported from Canada, Mexico and the European Union — which went into effect June 1 — or consider exemptions or exclusions.
As trade deals collapse, manufacturers may have a chance to calm the storm and keep things on an even keel for shareholders and customers alike. According to Food Navigator, Edelman's latest trust barometer study found public trust in business leaders and CEOs had risen 7%, while public trust in government had dropped 30%. Since nobody wins a trade war when both sides are hurting, an incentive is there to maintain the status quo in prices and jobs — and limit U.S. and global economic uncertainty.
In addition, the election clock is ticking. If and when U.S. customers start feeling the pinch in their pocketbooks from these tariffs, they may show their irritation in the Nov. 6 general election — just when Trump is hoping voters will maintain the Republican majority in Congress. Trump also may be looking ahead to 2020 if he runs for a second term. Illinois and Iowa are traditionally the top two producers of corn and soybeans, and pressure could be on the White House to end or limit the damage to farmers in those states or risk losing support in the next presidential election.