As the U.S. and China continue to trade tariff threats, which carry significant implications for U.S. agricultural exports, members of northeast Nebraska’s agricultural community are taking a “wait-and-see” posture: unsure and uneasy of what’s on the horizon, but hopeful that the storm will pass.
“At this point, I see it as part of the negotiations, however unorthodox as they may seem,” said Matt Rasmussen, whose company, Soil Analytics LLC, creates soil sampling machinery used by farmers. “I think if, 30 days from right now, we’re either deadlocked or maybe still spiraling further toward the all-out trade war, then I think my concern goes up quite a bit.”
The volley of tariff threats between the two countries began after the Trump administration introduced tariffs on steel and aluminum last month. The move aimed to spur domestic steel and aluminum production. But it also angered China, the world’s largest exporter of steel, whom Trump has accused of using unfair trade practices.
China responded this week by imposing a tariff on $3 billion worth of American goods, including a 25 percent duty on pork. After the U.S. announced a retaliatory tax on $50 billion worth of Chinese goods, China hit back again, announcing another 25 percent tariff on $50 billion worth of American goods, including soybeans and corn.
Neither China nor the U.S. have actually imposed their most recently announced tariffs, and it’s unclear when they will do so, or if cooler heads will prevail in negotiations beforehand. But if imposed, Chinese tariffs on soybeans and other agricultural products that Nebraska exports could have a significant effect on the area’s agricultural economy, according to Jay Rempe, a senior economist at the Nebraska Farm Bureau, a trade organization that represents Nebraska farmers that has criticized the Trump Administration’s decision to enact tariffs.
“The biggest impact would be on soybeans,” Rempe told the Tribune. “China’s the largest purchaser of soybeans in the world.”
Nebraska exported more than $1.6 billion worth of soybeans in 2016, the fifth highest in the country, according to USDA numbers. About half of that went to China, Rempe said.
The Farm Bureau estimates that soybeans are the top exported commodity in 42 of Nebraska’s 93 counties, mostly on the eastern third of the state, Rempe said. That includes Dodge County, which exported more than $43 million worth of soybeans in 2016, according to Farm Bureau estimates.
Corn, included in China’s proposed tariffs, also figures heavily into Nebraska’s export economy. The USDA estimates that the state exported nearly $1.2 billion worth of corn in 2016, the third most in the country.
“The Chinese market for corn is kind of up and down,” Rempe said. “If you look at the corn and soybeans in storage, at one point in time (on the day the tariffs were announced), farmers had lost over $100 million in value because of the uncertainty over these tariffs.”
One study, conducted at Purdue University just before China’s recent announcements, suggested that, with a 30 percent tariff, U.S. soybeans imported to China could fall by 71 percent and total soybean exports from the U.S. could fall by 40 percent.
“For farmers and ranchers, we’ve seen a drop in farm income over the last four or five years,” Rempe said. “Anything that disrupts our markets right now is just gonna make it that much harder to earn a living.”
That’s the concern for Brent Willnerd, a Fremont-based farmer who grows soybeans and corn.
“You don’t know what the tariffs are truly going to do,” Willnerd said. “Is China just going to say nope, we’re going somewhere else, we can get enough of our beans somewhere else? Or are they just playing hardball and they still have to buy them from us? That’s the whole biggest unknown.”
Willnerd said that bean prices have jumped around with the announcements, sinking the day the tariffs were introduced and then recovering somewhat after. That hasn’t hurt him too much in the short-term—he’s already sold all of last year’s and much of next year’s crop.
But the possibility of losing the Chinese market creates uncertainty about the future, Willnerd said, and whether or not the tough posturing will help address trade imbalances.
“It’s kind of a hard thing to pinpoint exactly because, could it help us in the end? Possibly. But it definitely could hurt us,” Willnerd said. “It’s scary.”
Rasmussen of Soil Analytics believes there’s a definite need to discuss our trade relationships with countries like China, and he views these early tariff talks as a form of “clumsy” negotiations. But he warned that nobody wins in a trade war, and said that countries should come up with a way to better negotiate trade agreements.
“I’m not sure tariffing our way to better trade is the answer,” Rasmussen said. “I’m willing to say that maybe there’s just some need to get people to the table, that before there just hasn’t been the urgency.”
Meanwhile, some of China’s tariffs have already been enacted—most notably, the 25 percent duty on pork.
In Platte County, pork plays a larger role in the export economy—in 2016, the pork accounted for $32 million, the third highest export in Platte County, compared to $4.6 million in Dodge County, according to estimates from the Farm Bureau.
But Jim Pillen of the Columbus-based Pillen Family Farms, which produces pork for Tyson and owns a swine genetics company, isn’t worried about the new tariff.
“In the pork industry, we’re close to 30 percent of our industry—3 out of 10 pigs—we’re exporting,” Pillen said. “Out of the 30 percent that we’re exporting, China would take about 7 percent. So that would be around one and a half percent of our total production.”
In the short-term, markets have been slumping, Pillen said. But he doesn’t believe that tariffs tell the whole story.
“The anxiety or the fear of the unknown has certainly driven the near term market down,” Pillen said. “It’s not quite that direct because this time of the year, always, every year, because of Easter season and Good Friday, the market demand in late winter and early spring decreases.”
Pillen said that he doesn’t necessarily agree with the provocative approach of “picking one-on-one fights,” and would rather see the U.S. seek more agreements with more allies. But he does believe it’s important the U.S. push for fairer trade, especially to prevent the theft of intellectual property. On the whole, he’s optimistic on the future.
“Our administration certainly knows how important agriculture is and how important rural america is,” he added. “The reality is you’re going to lose a market every now and then, but we just gotta keep working hard to keep opening markets.”
The Hormel Foods plant in Fremont did not respond to requests for interviews regarding the pork tariffs.
Rempe says that farmers across the state appear to have “mixed emotions” on the ongoing trade talks.
“They understand the concern with China and particularly the intellectual property theft and things like that,” Rempe said. “They wish that President Trump had chosen a different mechanism or means of trying to address that problem than imposing tariffs, because it costs them directly in the bottom line.”
Meanwhile, on Thursday, reports surfaced that Trump was considering tariffs on $100 billion worth of Chinese goods—the latest salvo and an apparent escalation in tensions. But there’s still reason to hope that real economic consequences could be avoided.
“We had been fortunate to meet with under secretary [Ted] McKinney from the USDA in Omaha on Wednesday, and that was his message to us, was be patient, negotiations are ongoing and we’re going to try to resolve this without any harm to anybody,” Rempe said.