There’s a Chinese proverb: Sow melons, reap melons. Sow beans, reap beans.
In other words, expect tit for tat.
President Donald Trump — and by extension many of the nation’s farmers — is seeing that lesson in action after he launched a bevy of tariffs against China on Friday, prompting the People’s Republic to retaliate with its own tariffs on imports from the United States. Among those American goods are some key Texas exports, including cotton, corn and sorghum. Some of the Chinese goods targeted in Trump’s tariffs are vital parts for Texas’ agriculture industry, such as livestock equipment.
“No question, it’s going to hurt,” said Gene Hall, a spokesperson for the Texas Farm Bureau.
Throughout his presidential campaign and since he was inaugurated, Trump has threatened to amp up protectionist measures on the world’s second-largest economy. It was a campaign issue that resonated with many Trump voters, including many Texas farmers.
“We are not in a trade war with China, that war was lost many years ago by the foolish, or incompetent, people who represented the U.S.,” Trump tweeted in April. “Now we have a Trade Deficit of $500 Billion a year, with Intellectual Property Theft of another $300 Billion. We cannot let this continue!”
On Friday, the United States levied tariffs on $34 billion worth of Chinese goods. China responded with its own tariffs on $34 billion in U.S. exports.
The Chinese Ministry of Commerce called the United States a “typical trade bully” set on igniting the largest trade war in history and violating World Trade Organization agreements.
“Instead of serving the interests of U.S. companies and people, the move will prove to be counter-productive and damaging,” the Chinese commerce minister said in a statement.
For Texas farmers, the trade war plays havoc with their bottom line. Tens of billions of dollars of goods trade between China and Texas each year. Texas exported $42 billion in goods to the country in 2017, second only to Mexico.
Cotton is the state’s 10th largest export. Nearly half of the U.S. cotton exported to China comes from Texas. Soy is a smaller market for Texas but China is the state’s largest international soy customer. Texas exports about $157 million worth of corn a year, making it the 13th largest exporter of the crop in the country, though U.S. corn exports to China have dropped precipitously over the past few years due to increased regulations on the Chinese side.
Wesley Spurlock, a corn farmer in Stratford and chairman of the National Corn Growers Association, said the weeks of talk of a trade war had already hurt Texas farmers. The prices of corn and soy have both decreased by around 15 percent since mid-May. The price of cotton has decreased by over 11 percent since mid-June. Spurlock credits those declines with the threat of tariffs, a situation that could be exacerbated with their enactment.
Dee Vaughan, a corn and cotton farmer from the Panhandle, said even the threat of tariffs has caused shipping companies to be more hesitant buying his crop. Prices had already been low going into the spring, he said, though farmers were “cautiously optimistic” about this year’s revenues. But “simply because of the uncertainty, if nothing else, all the rhetoric that’s going on” for the past few months has been keeping farmers worried that they’ll be able to make fewer sales.
“You couldn’t pick a worse time for agriculture to be in a trade dispute,” said Hall, the Texas Farm Bureau spokesperson pointing to a 50 percent decline in agricultural income since 2013. He said the farm bureau always supports negotiating trade disputes over gratuitous tariffs — but that many farmers hope the president’s actions will force China, which has historically acted in ways that have harmed Texas agriculture, to the negotiating table.
“There is some patience in the agricultural community for what the president’s doing, but there is some angst as well,” Hall said.
As China’s middle class expands and demand for protein grows, soy has become essential in providing feed for the country’s growing beef industry, Spurlock said. China imports more than half of American soybeans, and the United States is the second-largest soy exporter to China, representing about 34 percent of the country’s soy imports. Spurlock fears the new tariffs will push Chinese consumers to look to other producers to get their soy, such as Brazil, which already accounts for more than half of all soy imports in China.
The tariffs will also make agricultural equipment more expensive, but Spurlock said those rising costs are more of an inconvenience than a damning new expense. Vaughan echoed that sentiment, saying he is more concerned about not being able to sell his crop than the rising cost of farm equipment since he doesn’t need to buy equipment very often.
Though the agriculture industry will face a bitter few months with rising costs and damaged competitiveness, Spurlock said he hopes the tariffs work to improve and smooth trade between the United States and China, whose byzantine bureaucracy makes penetrating the market slow and cumbersome. If the tariffs work to bring China to the table to expedite trade allowing corn to become a major export to China, Spurlock said the United States could become the world’s leading food producer.
But when asked if he is optimistic the tariffs will work, Spurlock said, “I have to be optimistic.”
Disclosure: The Texas Farm Bureau has been a financial supporter of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune’s journalism. Find a complete list of them here.
Source: Texas Tribune Economy