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US farmers caught in trade war with China

International Business
Sun, 08 Jul 2018
AFP
1 of 2

Harvard, United States: Terry Davidson expects to be farming long after the US-China trade tariffs that took effect Friday become a distant memory.

The Illinois soybean grower is more optimistic than others that things will work out, but many farmers in the Midwestern farm belt are not so sure, following the opening salvos in a trade war.

All are caught in the middle, after Washington on Friday imposed 25-percent duties on $34 billion worth of Chinese machinery, electronics and high-tech gear.

Beijing had already said soybeans would be among US products it would retaliate against, and fought back dollar for dollar immediately after the US tariffs took effect in line with President Donald Trump's repeated criticisms of China's economic practices

"We've survived since the 1800s and we're still going," said Davidson, 41, a fifth-generation farmer and a Democrat among mostly Republicans. "So, I think we'll keep going."

In the meantime, he is unsure how the tariffs will affect the prices he can command for his crop when harvest time comes in a few months.

"Other countries are trying to stock up on US soybeans. They're taking the place of what China has done to us," Davidson told AFP, striking a note of cautious optimism at his farm outside Harvard, Illinois, a two-hour drive and a world away from Chicago.

But other farmers -- and the interest groups that represent them -- are sounding the alarm.

Soybean growers are especially concerned. They sell most of their crops overseas, and China is their biggest and fastest-growing market.

While many farmers support Trump's stated efforts to negotiate better trade deals, many are unsure tariffs are the best approach and fear the economic damage they could cause.

Illinois is the nation's top soybean producer and home to about 43,000 farmers who grow the crop.

Soybeans, they say, are relatively cheap to grow and are in demand overseas, helping farms stay profitable even through the boom-and-bust cycles inherent in agriculture.

The crop is easy to spot in Harvard, covering miles and miles (kilometers) of land, including on Davidson's family farm.

Half of his land is set aside for soybeans, the other half for corn.

The thick rows of soybeans Davidson walks through are already three feet (one meter) tall, with broad leaves hiding the small bean pods. He plans to harvest in early autumn.

Because he has no storage facility, he will have to sell the crop immediately after harvesting and accept whatever price he can get.

"I've never heard of a tariff on soybeans before by one of our biggest buyers in China," said Davidson, his hair bleached almost white by hours spent under the blazing sun.

"But I'm not worried about it at all, because I truly believe it's gonna end by harvest season."

Tariffs can potentially wreak havoc on soybean prices, which began dropping in May in anticipation of a trade war.

"In the short term right now, we're taking a hit," said Kentucky farmer Davie Stephens, 52.

"There's not been a lot of tariff wars that have come along, so some of us have been experiencing this for the first time," he said.

The American Soybean Association has been encouraging farmers to speak out in a social media hashtag campaign, hoping at least to help keep the tariffs short-lived.

"The longer it goes on, China looks -- and other customers look -- to find other sources (of soybeans)," said farmer Wayne Fredericks, who is on the association's board of directors.

The potential peril is not the farmers' alone.

Any economic pain could translate to political hardship for Trump. Soybeans are grown in some of the very Midwestern states that helped elect him in 2016.

The Trump administration believes tariffs are necessary to hold Beijing to account for what the president has described as underhanded economic treatment of the United States.

The US trade deficit in goods with China ballooned to a record $375.2 billion last year.

While many farmers say they are willing to give Trump the benefit of the doubt -- hoping he will eventually strike lucrative new trade deals -- their patience is finite.

"We've been supportive of an effort to correct these trade imbalances," said Fredericks, a fourth-generation farmer in Iowa.

"If (imposing tariffs) works, that's great. If it don't work, there's going to be a lot of disappointment," he said.

The still unanswered question is how long farmers can hold out. Much of the economic pain is yet to come, because importers of US goods bumped up purchases to record levels in anticipation of the tariffs.

Michael Boland, who studies agribusiness at the University of Minnesota, expects the economic pain to last as long as the tariffs do.

"The soybean grower already planted a crop and there was little profit," Boland told AFP. "The tariff will reduce this profit to almost zero or even negative."

In Harvard, Davidson is more sanguine, expecting that opposition from farmers and others will lead to a change in the tariff policy.

"I think there will be enough revolt," he said, "that it's going to have to end."

nov/bbk/it