Iowa

Iowa Farmers Could Lose $620 Million From U.S.-China Trade War

Commodities are falling across the board, but soybean farmers are taking the brunt. What's happening in Iowa is the perfect demonstration of why trade works.

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Scott Sinklier/Newscom

From small town Iowa farmers to big shot Wall Street traders, President Donald Trump's President Donald Trump's embrace of economic protectionism and trade war brinkmanship is raising the specter of financial losses.

Soybean farmers in the Midwest state stand to lose more than $620 million this year, according to Iowa State University economist Chad Hart, as China targets the crop with tariffs in response to the Trump administration's announcement last week that it would go ahead with a plan to slap tariffs on $50 billion in Chinese imports.

"Any tariff or tax put in place will have a significant impact, not only to the U.S. soybean market, but to Iowa's because we're such a large producer," Hart told The Des Moines Register for the paper's front-page story on Saturday. "It will slow down the market."

Even a minor slow-down adds up quick, because of the sheer size of the American soybean market. Farmers planted more than 89 million acres of soybeans across the United States in 2018, making it the most widely planted crop in the U.S. this year—yes, ahead of even the heavily subsidized corn crop—according to an annual survey by the Department of Agriculture.

If the Chinese market closes, "it could be devastating for local communities across the Midwest," said Sen. Chuck Grassley (R-Iowa) last month. "It's also important to remember that when trade barriers go up, alternative sources of goods are found, and new trading relationships develop. A temporary setback could quickly develop into a permanent loss."

America is the world's biggest producer of soybeans and the world's largest exporter of them. In 2015, nearly half of the U.S. soybean crop was exported. Meanwhile, China is the world's largest importer of soybeans, buying more than $14 billion of American-grown soy last year. China purchases 61 percent of total U.S. soybean exports and more than 30 percent of overall U.S. soybean production, according to the American Soybean Association, a trade group.

Asked about the front-page Register story during an appearance Sunday on NBC's Meet The Press, White House counsel Kellyanne Conway disagreed with host Chuck Todd's suggestion that the tariffs could create a "political problem" in the Midwest.

"Many [Midwestern farmers] are very supportive of President Trump because they like his policies when it comes to the tax cuts, the deregulation," Conway said. "This will play out over time, but he's tired of the American workers getting screwed."

The situation in Iowa is a perfect illustration of how trade between nations makes both parties better off, while erecting barriers to trade hurts both sides. The Trump administration is trying to sell their tariff plans as a way to punish China for unfair trade practices, but in reality tariffs are taxes on consumers—that is, American consumers buying Chinese products—and already the tariffs are forcing price increases across several sectors of the economy. If China is being pushed, Americans are getting hit too.

When it comes to soy, the obverse is true. China is hitting American farmers with reciprocal tariffs, which will cut off supplies to Chinese consumers and likely raise prices while creating a crisis for American exporters who will now have to find alternative markets—hence the $620 million projected loss.

Other commodities are being hit too. The Wall Street Journal reported over the weekend that benchmarks for crude oil, gold, copper, aluminum, lead, and cotton all fell at least two percent Friday after the White House announced that it would go ahead with Chinese tariffs and the Chinese government responded with threats of the same.

The commodity markets have enjoyed their best year since 2002, but it appears the tide is shifting amid fears of a devastasting trade war.

"We now have potential for a full-blown trade war," Bart Melek, head of commodity strategy at TD Securities, told the Journal. "If I was an investor who made money, I may want to cash out here."

For the farmers who have already planted this year's crop, unfortunately, cashing out isn't really an option.

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33 responses to “Iowa Farmers Could Lose $620 Million From U.S.-China Trade War

  1. Like farmers won’t get bigger subsidy checks sometime around the end of October.

    1. ^This^

      I’ll try to keep my shocked face ready for when soy farmers end up getting ~$620 million or so in subsidies in next year’s farm bill. It’ll be hard though, something tells me my shocked face is going to get a lot of usage between now and then.

      1. Midwestern farmers can all become doctors, lawyers, and software engineers!!! Problems solved!

        (Yer welcome!)

      2. ^this^

        typical americans crying about protectionism, without blinking about the farming subsidies given to american farmers, mentioned in this article

        and the anticipation of subsidies to be given to Soy Farmers

        getting rid of tariffs in other countries wont change the fact you americans buy more than you make and go into debt to buy even more

  2. Iowa Farmers Could Lose $620 Million From U.S.-China Trade War

    Key word “could”.

    Currently Iowa farmers lose millions, if not billions, in Chinese and other national trade restrictions that cause high costs and higher prices for resources.

    We can continue the status quo or rattle their cages to get trade restrictions lowered. It might work. It might not work.

    1. That is where I am torn. While I don’t like these tariffs listening to the EU and Canada bitch is equally annoying. Especially the EU. The Eu is nothing but a protectionist racket. Not only do they Tariff goods but they place additional restrictions on imports making compliance extremely expensive. As Trump says he wants Tariff free trade but not if we are the only ones not doing the Tariffs.

      1. Trump should have avoided the fight with the EU and Canada, it is pointless. He should have focused on China, everything else is small potatoes. Work on a new round of WTO negotiations by bullying everyone to come to the table and actually agree to reciprocal trade would be good too.

        But yes, the EU is a big protection racket.

        1. But yes, the EU is a big protection racket.

          And who are we to tell them that they shouldn’t be regulating GMOs?

          Oh wait, Bailey, Suderman, Tupy, and a couple of others do that every couple of months. So, I guess the answer is, “Them! That’s who!”

      2. you could start by getting your facts straight… acting as if the USA does not do Tariffs of its own

        .
        .

        Since 2008, no country in the G20 has implemented more protectionist measures than the United States

        GISreportonline

      3. As you mentioned, I am also torn. I would rather have 100% free trade but these protectionist rackets will never change unless you shake things up for them.

        The EU, Canada, and China was relatively easy and cheap access to the best market in the World (The USA) while keeping their markets very restricted.

    2. it wont work,

      worse off you americans think the Chinese will back down, totally misreading them

      as they are preparing for, and thinking they can put up with the pain for longer against you americans

      they have so many weapons they can use against you, while you still think they are knee deep in the mud of their rice paddy lots.

      even more worse you have countries like India, Mexico, China who have already imposed some tariffs and China/EU about to do it early in July

      1. China has already flinched.

        1. no they havent obviously they have offered a compromise

          but they are preparing for a trade war you better as well, prepare for one with China and many more countries

          1. “no they havent obviously they have offered a compromise

            You don’t understand what ‘flynch’ means, do you?

            1. Flynch is not ‘cave.’

              1. “flinch – avoid doing or becoming involved in”

                thus my comment the Chinese offering to buy 70 billion to 100 billion more in goods from the USA

                something the Chinese would have done if your president would have shown up in China with a trade delegation

                seriously you want to argue the meaning of a word?

                or a trade war you are about to see an escalation in, starting July 6th for China and July 1st for Canada and July for the EU

        2. In March 2009, the Pentagon for the first time held a series of economic war games exercises. The soldiers were Wall Street traders and executives, economists and academics. The weapons were stocks, bonds and currencies. The participants were divided into teams: the U.S., China, Russia, Japan, the European Union and so on. Then the teams were presented with different scenarios ? North Korea is imploding, a major global economy is melting down ? and told to do what was in their best interests. Our intelligence experts watched as the economic conflicts played out.

          What the exercises showed was that the U.S. consistently lost to China in economic warfare. Part of the reason was that the U.S. could be easily distracted by expensive side conflicts that sapped our economic strength. But the more important reason was that China could inflict real pain on the U.S. without feeling it at home. For instance, by simply moving the maturities of some of its $850 billion in Treasury holdings from 90 days to 60 days, it could cause chaos in the U.S. stock markets. Or China could sell just a trickle of its U.S. financial assets and signal that it didn’t have confidence in the U.S. economy, setting off a panic here.

          Huffington Post

      2. they have so many weapons they can use against you, while you still think they are knee deep in the mud of their rice paddy lots.

        It’s bordering on self-satire that your perception of world economics hasn’t changed a bit since Wainwright Montgomery Burns was king of the atom-smashing game.

        1. think what ever you want…

          here is just one weapon dont even know about.

          .
          .

          Two pillars of Trump administration policy ? combating the soaring prices for prescription drugs and equalizing the U.S. trade imbalance with China ? appear to be on a collision course, drug and foreign policy experts say.

          That’s because the key ingredients for so many essential drugs, from antibiotics and birth control pills to treatments for cancer, depression, high cholesterol and HIV/AIDS, are purchased from China, says Rosemary Gibson, co-author with Janardan Prasad Singh of a new book called “ChinaRx: Exposing the Risks of America’s Dependence on China for Medicine.”

          China has exclusive manufacturing agreements for drugs for anesthesia, cancer and HIV/AIDS, along with other medicines that “we use every day, not only in hospitals but in our own medicine chests,” Gibson says, adding that China is now the world’s only source of antibiotics, including the main ingredient in vancomycin, a treatment of last resort that is used by patients who are suffering from infections that are resistant to other treatment.

          “It’s a huge dramatic shift and nobody knows about it,” Gibson says. “And they’re just ramping up. It’s all part of a plan that China laid out in its 2025 initiative to become the pharmacy to the world.”

          USnews

  3. Ronald Reagan hectored Europeans to not build a gas pipeline to the Soviet Union because he understood this pipeline could be used to exert political pressure on Western European democracies. Dependency on an unfriendly trading partner is never wise. Observing Ukraine in particular and Germany, France, Greece, Turkey, etc. in general in appears Ronald Reagan was right because he rightly understood there is more to the world than economics. Ukraine and Belarus have been smashed by Russia through gas warfare and Germany has played fast and corrupt sucking up to Russia because of this too (hello Gerhard Schroder on the board of Gazprom and Nord Stream corruption).

    It appears are neoliberal free trade zealots since did not equally understand simple geopolitics like Reagan. China is an unreliable and unfriendly trading partner who furthermore is a totalitarian oligarchy. They habitually lie, flaunt international norms, blatantly steal intellectual property, dump goods on markets with regularity with the goal of smashing competition, limit market access, etc. It was foolish in the extreme to ever center global production around the the CCP cartel-led China and now we have to reap the rewards of this foolishness.

    1. “China is an unreliable and unfriendly trading partner who furthermore is a totalitarian oligarchy.”

      Not sure who is worse though. The EU is basically just an economic protectionist racket. Their anti-GMO policies have really nothing to do with safety(lets forget that GMOs are safe) and all to do with protecting their agricultural industries from US competition. I mean it amazed me that the UK can’t make independent trade deals with Canada.

      1. China is worse. They have the intent and the capability to recenter the globe around them, the Europeans have neither.

  4. Other commodities are being hit too. The Wall Street Journal reported over the weekend that benchmarks for crude oil, gold, copper, aluminum, lead, and cotton all fell at least two percent Friday after the White House announced that it would go ahead with Chinese tariffs and the Chinese government responded with threats of the same.

    I remember Ken Schultz using commodity futures as a benchmark of why the markets didn’t really believe Trump was going to be instituting his tariffs back in February/March. I wonder if Ken will use this as an indicator that since Trump raised tariffs already, that maybe these recent announcement are more than just negotiating tools? That markets apparently think so.

    1. *The* markets…

    2. Ken was pointing out that Reason and some people were acting like threats of tariffs and actual tariffs are the same thing.

      He, like myself, was trying to discuss Trump’s strategy to shake up managed trade around the World. Trump thinks he can get trade restrictions lessened. It might work. It might not work.

      I prefer free trade but we the USA does not have free trade with any other trading partner. We have free trade among US states. This is about managed trade and Trump thinks he can negotiate better trading rules for the USA with other nations.

  5. So, what you’re saying is that when other countries pull the tariff shit that Trump’s trying to pull, it should work–for them. It will get them everything they want from us.

    But in won’t work for us for some reason. Could it be because their media and opposition would get shot if they spent their time trying to undermine the trade negotiation process?

    And none of you see what colossal asses you’re being?

    1. it wont work because the underlying issue isnt Tariffs, the underlying issue is you Americans buy more then you make and go into debt to buy even more

      This year your Government had to borrow 1.3 trillion dollars to balance the budget,

      much of that money flows into the economy, where some of it ends up buying products from other countries, where they in turn take your Fiat dollars in return, and invest it in your Sovereign Government bonds you will never be able to pay off

  6. I’ll oppose the trade war on general principle, but I can’t help noting that 30% of 89 million acres dedicated to growing soybeans for Chinese consumers is 27 million acres. That’s enough land to build 108 million single family homes on quarter acre lots. And this is a collection of land that no one noticed we had. We have so many young Americans who cannot find affordable homes. We have 3-D printers that can print homes for $10,000 each. What prevents those soybean farmers from building new neighborhoods on their cropland to make better use of the fields now that they have less of a market for soybeans?

    1. No one wants to live in Iowa.

  7. So you think that one kind of market distortion (making people grow junk like soybeans) is not only OK, but also better than any other kind of market distortion? Got it.

    How about “farmers” (and by that, it’s usually really just Big Ag) grow something else?

    1. the market distortion you are talking about is called Capitalism

      the farmers see a demand for Soybeans, they grow them and sell them

  8. Everybody seems to be missing a very important point. The US is the largest soybean grower in the world. The tariff that China wants to impose will cause the price of our soybeans to go up only to the Chinese, the rest of the world is not effected with regard to the price of US Soybeans. Now China still needs the same about of soybeans as before the tariff this means that China will need to look to other countries to purchase. This will cause the price of soybeans to rise in countries where China is buying. The other purchasers of Soybeans will then look to a supplier with a ready supply of lower cost soybeans, us.

    Tariffs can hurt a company like Harley but when your dealing with a commodity with a worldwide market they have very little effect.

  9. The US Government sets the trade policy.

    The Chinese Communist Party sets the trade policy.

    The EU Committees set the trade policy.

    Trump at least wants free trade where the TOP MEN dont decide every facet of trade.

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