Chinese tariffs are expected to be tough for Midwest ag states

Chinese tariffs are expected to be tough for Midwest ag states
Women push a shopping cart near nuts and sweets imported from the United States and other countries displayed in a section for imported foods at a supermarket in Beijing on Monday. (The Associated Press)

WASHINGTON — Farm country knew trade retaliation was inevitable, but that doesn’t make a round of Chinese tariffs sting any less.

In response to the Trump administration’s new U.S. taxes on Chinese steel and aluminum, China counterpunched Monday with tariffs on $3 billion in U.S. products, from aluminum and apples to walnuts.

Pork was among U.S. exports targeted, bringing fresh pain to producers across the country, including those in Nebraska and Iowa.

Expectations of Chinese action had already driven pork prices down.

“The market just doesn’t like uncertainty,” said Mark McHargue, a pork producer from Central City. “These kinds of things are very disruptive.”

On Wall Street, the stock market buckled on the prospect of an all-out trade war between the world’s two biggest economies. But it hasn’t come to that — not yet, anyway.

“We’re in a trade slap-fight right now,” not a trade war, said Derek Scissors, resident scholar and China specialist at the conservative American Enterprise Institute.

China is a relatively insignificant supplier of steel and aluminum to the United States. And the $3 billion in U.S. products that Beijing targeted Monday amount to barely 2 percent of American goods exported to China.

But the dispute could escalate, and quickly.

Already, in a separate move, the United States is drawing up a list of about $50 billion in Chinese imports to tax in an effort to punish Beijing for stealing American technology or forcing U.S. companies to hand over trade secrets.

McHargue has personally participated in trade missions promoting Nebraska pork. He said it’s difficult to see America adopting a protectionist stance that runs counter to long-running efforts to open overseas markets.

He understands the United States must do something about Chinese misbehavior such as stealing trade secrets, but then agriculture producers get hurt in the backlash.

“We’re a pawn in the game,” McHargue said.

Pork producers could face falling prices, while communities around processing facilities in Nebraska and Iowa could see slow-downs.

“The pork industry is one of the more heavily dependent on export markets, them and soybeans,” said Jay Rempe, an economist with the Nebraska Farm Bureau. “They need a growing export market and anything that disrupts that is not good.”

Beijing is imposing a 25 percent tariff on U.S. pork and aluminum scrap and 15 percent on sparkling wine, steel pipe used by oil and gas companies, and an array of fruits and nuts including apples, walnuts and grapes.

American farm exports to China in 2017 totaled nearly $20 billion, including $1.1 billion of pork products.

One area missing from China’s tariff action was soybeans, which it buys in massive quantities. There is fear that President Donald Trump could move to impose additional tariffs on Chinese imports.

“If he does that, then I think that soybeans might be the next shoe to drop,” Rempe said. “That could be very painful.”

Rempe noted declines in farm income in recent years.

“Any further hiccup in export markets could really be a potential problem,” he said. “And we’re really trying to drive home the message with the Trump administration of that.”

Gov. Pete Ricketts gave a relatively low-key response about the Chinese tariffs on pork products.

“In general, this is part of the overall trade negotiations the Trump administration has,” he said. “Obviously one of the concerns we had when we heard about the steel tariffs was retaliation against our ag products.”

Ricketts said he has talked with Agriculture Secretary Sonny Purdue and Commerce Secretary Wilber Ross about the potential for retaliation and urged them to manage the trade situation.

He said the administration appears to be making progress, as evidenced by the new trade agreement with South Korea. He also called it good news that the U.S. and China are talking with each other.

“I think it’s a process and so far the process seems to be working,” he said, noting there is a need for American goods to be able to compete on a level playing field.

Craig Hill, president of the Iowa Farm Bureau, pointed to uncertainty that continues to surround the future of the North American Free Trade Agreement and a trade agreement with South Korea.

The pain for agriculture will continue until there is more consistency and clarity on trade, Hill said. And he noted ominously of China, “They haven’t begun to strike back. If they want to inflict pain and match tit-for-tat, they can go a lot further.”

World-Herald staff writer Martha Stoddard contributed to this report, which contains material from the Associated Press.