Chinese Trade Wars Backed by USDA Support

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Trade Dispute with China Worries Agriculture; USDA Vows Support

by: Food and Drug Law at Keller and Heckman of Keller and Heckman LLP - The Daily Intake

Tuesday, June 26, 2018

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The U.S. agricultural industry has voiced concerns about potential financial losses due to the ongoing trade dispute with China, notwithstanding U.S. Agriculture Secretary Sonny Perdue’s assurance last April that farmers will be protected.
By way of background, on June 15, President Trump announced that the U.S. will impose a 25% tariff on $50 billion in Chinese imports in order to address China’s violation of American intellectual property rights. The tariffs are scheduled to become effective July 6. In response, China announced 25% tariffs on $34 billion worth of U.S. goods, including various agricultural items (e.g., seafood and pork varieties, soybeans, etc.). A few days later, President Trump declared that he had directed the U.S. Trade Representative to identify $200 billion worth of Chinese goods as candidates for additional tariffs at a rate of 10%.
As previously reported on this blog, Secretary Perdue stated that USDA was seeking to shield farmers from the impact of additional tariffs imposed by China. In a June 25, 2018 editorial in USA Today, Perdue stated that while USDA has tools available “to support farmers faced with losses that might occur due to downturns in commodities markets,” the strategy has not been unveiled because “it is not good practice to open our playbook while the opposing team is watching.” He added, “If China does not soon mend its ways, we will quickly begin fulfilling our promise to support producers, who have become casualties of these disputes.”
Since Purdue vowed support for farmers in April, several reports on potential losses to the agricultural industry have been issued. For example, Iowa State University Economist Chad Hart (Des Moines Register) has estimated that Iowa farmers could lose up to $624 million due to tariffs, depending on their duration and the time needed to find new markets. Further, the price of soybeans dropped more than $1 per bushel between June 1 and 22 of this year, according to Nick Moody, President of the Virginia Soybean Association (The Virginian-Pilot).
The National Pork Producers Council has asserted that hog futures have dropped by $18 per animal since March due to speculation of Chinese retaliation again U.S. pork. That translates to $2.2 billion loss on an annualized basis, according to Iowa States University economist Dermot Hayes. After China increased the tariff on U.S. wine imports by 15% in April, Robert Koch, President and CEO of the Wine Institute stated in a press release, that “these tariffs put our products at a price disadvantage and we urge swift resolution of this issue before long-term disruptions are felt. U.S. wine exports to China and Hong Kong were up 10% in 2017 to $197 million, and a value of U.S./California wine exports to China alone have increased 450% in the past decade, reports the Wine Institute.