Farmers Stuck in Tariff Turmoil

Farmers are stuck in tariff turmoil.

June 19, 2018

NASHVILLE, Tenn (RFD-TV) Farmers are stuck in tariff turmoil. Angered over Chinese retaliation, President Donald Trump makes plans to implement a 10 percent tariff on an additional $200 billion worth of Chinese products. Beijing says it will strike back, after already hitting ag products with a 25 percent tariff, set to be imposed July 6.

So far, soybeans have seen the biggest impact, with the November New Crop Contract losing more than $1.25 since May 29. China buys more soybeans from the U.S than any other ag commodity, a market worth about $14 billion just last year. But China’s appetite for U.S corn is also growing, with imports surging almost 240 percent last year, worth $160 million.

Grain groups are aware of the potential losses and share their concern. Tom Sleight, with the U.S. Grains Council, explains, “They’re supportive of these actions, particularly in China, but they’re nervous on the longer term impact and nervous about losing a market and the time it takes to rebuild a market.”

India has also jumped on the retaliatory tariffs bandwagon, announcing plans to hike duties on 30 American products, including almonds, walnuts, and motorcycles. New Dehli says the move will compensate for the $241 million in penalties it faces as a result of U.S. steel and aluminum taxes. The tariffs take effect later this month, with India saying that it will raise the taxes even further if the U.S. ups duties again.

And troubles are still brewing closer to home: the Secretary of Agriculture just returned from Canada, where he met with his Canadian counterpart to discuss ag trade issues, including their controversial dairy supply management program.

Secretary Perdue was clear that USDA is not responsible for negotiating trade deals, which are in the purview of U.S Trade Ambassador Robert Lighthizer, so conversations did not get specific. But he expects talks to be rekindled soon.

“My expectation is we will continue,” Secretary Perdue said. “Minister Breeland, after meeting with Ambassador Lighthizer, expressed the fact that we will continue to discuss NAFTA on into the summer and that hopefully have some resolution there. We feel probably more optimistic in a Mexican agreement sooner than Canada; we still have some intractable issues with Canada that we are working through.”

Looming elections south of the border raise the stakes. The Mexican presidential frontrunner says an end to NAFTA wouldn’t be “fatal” for Mexico. In response, Perdue says the U.S. may split NAFTA into two deals.

“The issues with Mexico and Canada are vastly different in many ways, and I think the Ambassador believes we could get a bilateral deal done more quickly with Mexico than with Canada, and then possibly come back together with all three nations.”

Dairy continues to be one of those “intractable” issues alluded to by Perdue between the U.S. and Canada. Perdue says it allows for overproduction, causing unfair competition for producers abroad.

“Frankly, I don’t know how we can go forward if Canada insists on a Class 7 part of their program,” Perdue stated. “Hopefully we can make that clear to them regarding their supply management. Simply, we’re asking them to manage their supply domestically. That’s what a supply management program is all about, and we insist that they do that so they do not effect world markets.”

Secretary Perdue says he doesn’t think it’s appropriate to tell Canada to eliminate their supply management program, but President Trump has made it clear in recent weeks he expects big changes on dairy specifically, or NAFTA will be in jeopardy.

Many Canadians oppose changes to the country’s dairy policy, But that nation’s largest dairy processor thinks the U.S has a point. In regards to Canada’s Class 7 milk policy, Saputo Inc. Says it creates an “incredible imbalance” in the world market, and eliminating it would go a long way in shoring up NAFTA negotiations.