Michigan farmers wary as U.S.-China trade war escalates
Michigan farmers fear an escalating trade war between the U.S. and China after Chinese officials announced tariffs on $60 billion worth of additional goods in retaliation for levies imposed by President Donald Trump.
Farmers who produce goods ranging from pork to soybeans to milk say the trade war with China has been costly even before that country threatened to impose new tariffs effective June 1. Soybean prices fell 11 cents to $7.87 per bushel on Monday, their lowest in a decade.
Doug Darling, who grows corn, soybeans and wheat near Maybee in Monroe County, said the trade wars being waged by the Trump administration are taking a toll on his bottom line.
"In the last year alone, soybean value is 20% less than the year before," he said. "It makes it harder to try to make budgets. Health insurance keeps going up, auto insurance keeps going up. ... Those are fixed (costs) and it's really tough."
Darling said international markets are crucial to Michigan farmers, noting that that the production of one out of every three acres that is farmed in the state is exported. China is the fourth-largest destination for Michigan agricultural exports, behind Canada, Mexico and Japan, according to the Michigan Farm Bureau. The food and agriculture industry contributes $101.2 billion annually to the state’s economy, according to the farm bureau.
"As farmers, we deal with a global commodity," Darling said. "It's traded everywhere because everybody wakes up hungry. It doesn't matter where you are or what your religion is."
Allen Bischer of Minden City, who grows dry beans and sugar beets, agreed. He said farmers are getting squeezed by tariffs from all directions as the Trump administration tries to negotiate new trade deals with China and European Union, and convince Congress to approve its replacement for the North American Free Trade Agreements.
"It's affecting us all," he said. "Dry edible beans go into the European market and Mexico, soybeans and corn go into China."
Bischer forecasts a loss for 2019, and the assistance he has received from the Trump administration has not been enough to offset losses he has incurred due to high levies.
"We received one penny a bushel on corn because we don't grow soybeans," he said. "One cent is nothing compared to 30 to 40 cents it's dropped."
The U.S. Department of Agriculture announced a plan last year to authorize up to $12 billion in programs to provide assistance to U.S. farmers who were impacted by retaliatory tariffs that have been imposed during contentious trade negotiations between the Trump administration and Chinese officials. Agriculture Secretary Sonny Perdue has indicated the Trump administration is exploring the possibility of authorizing more aid.
Trump sought Monday to downplay the trade war fears. He tweeted: “There is no reason for the U.S. Consumer to pay the Tariffs, which take effect on China today. This has been proven recently when only 4 points were paid by the U.S., 21 points by China because China subsidizes product to such a large degree.
"Also, the Tariffs can be completely avoided if you buy from a non-Tariffed Country, or you buy the product inside the USA (the best idea)," Trump continued. "That’s Zero Tariffs. Many Tariffed companies will be leaving China for Vietnam and other such countries in Asia. That’s why China wants to make a deal so badly!”
Michigan agricultural industry leaders were skeptical of his reassurances.
Mary Kelpinski, CEO of Michigan Pork Producers Association, said China’s tariffs on pork-related products increased from 12 percent to 62 percent after the initial round of salvos between the countries.
"It's having a huge impact on us," she said. "China is experiencing an animal health disease that's impacting its ability to produce more pork. It's one of the top markets we see potential for growth, but we're concerned if this continues to go on, we could lose the market completely."
Ken Nobis, senior policy advisor of the Michigan Milk Producers Association, said Michigan farmers who process milk have been getting hammered by the escalating tariffs since last year.
"We got hit pretty hard on the first round," he said. "I'm not sure how much more harm this is going to do. We lost more of our customers from the first round."
The Michigan economy could soon be facing a double-whammy because the president could move this week to impose tariffs as high as 25 percent on imported cars and auto parts. He faces a Saturday deadline to make a decision on a report he received from the U.S. Commerce Department in February that analyzed the national security impact of imported cars.
Trump has kept the contents of the Commerce Department report secret, but the national security examination process was used last year to impose tariffs on foreign steel and aluminum under a section of federal law that allows the president to unilaterally impose tariffs if the presence of a national security threat is determined to exist.
Carmakers, including Detroit's manufacturers, have implored the White House to forgo duties on imported cars. Foreign-owned manufacturers have touted how many of their cars are now built in U.S. factories, usually located in right-to-work states in the South that Trump swept on his way to office in 2016. Detroit carmakers have fretted about the possibility of stringent retaliatory tariffs.
European Union trade chief Cecilia Malmstrom said in a Bloomberg Television interview on Monday that retaliatory tariffs would be issued almost immediately if the president moves forward with auto tariffs.
“We are already preparing a list of possible items that would be on that list,” Malmstrom said. “The moment this is official — if this happens, I still hope it won’t — then we would publish that list."
Bischer, the Minden City bean and sugar beet farmer, wants for a deal between the U.S. and China that would ensure "fair, even trade as quick as possible," regardless of the political calculations that may be taking place in both Washington and Beijing.
"I don't get caught up in politics," he said. "All I know is I want to work for a profit like everybody else does."