Here Are the First American Casualties of Trump’s Trade War With China
Tariffs on pork and soybeans reverberate through the Heartland.
President Donald Trump has successfully launched a trade war with China, making good on xenophobic fulminations that stretch back well before his 2016 presidential campaign. And he’s also renewed his crusade against another trading partner, Mexico, raising the specter of a two-front trade war. Among the very first US casualties will be meat conglomerates and large-scale farmers rooted in the US heartland—both of which served as bastions of support for the mercurial candidate during the election.
On Wednesday, in response to Trump’s tariffs on aluminum and steel, the Chinese government announced plans to slap a 25 percent duty on US soybeans, days after doing the same with pork. For both of those commodities, US farmers churn out far more than can be used by the domestic market—about half our soybeans and a quarter of our pork supply are exported. And guess who they rely on to buy up the surplus?
American Farm Bureau Federation
Meanwhile, US soybean farmers are sitting on a record surplus of unsold beans from last year’s bumper harvest, and preparing to plant 89 million acres of the crop this year, just 1 percent less than last year’s largest-ever planting. After China’s tariff announcement, soybean prices dropped in Wednesday trading. And US farm-equipment giant John Deere saw its share price plunge nearly 3 percent as investors fretted that US farmers will be “slower to replace or upgrade old Deere equipment” if Chinese demand for their crops drops, Investors Business Daily reported.
The situation with pork and the China-Hong Kong market isn’t quite so stark—but note that the No. 1 destination for the “other white meat” grown by US farmers is Trump’s other bete noire, Mexico.
These trade hostilities come at a time when the US pork industry is ramping up capacity—not to satisfy domestic demand, which is flat, but rather in hopes of an export boom. As an analyst at the farm-credit company CoBank put it last year, “access to foreign markets will be critical to preventing a domestic supply glut as well as deterioration in [profit] margins for both producers and processors.” (The prize, of course, is China, whose population consumes more than half of the world’s pork.) Translation: If foreign markets don’t grow briskly, US hog farmers and pork packers are screwed. Not surprisingly, hog prices plunged 5 percent Wednesday.
While Trump’s trade bellicosity may thrill some of his core supporters, it could well hurt his party in this fall’s midterm elections. Check out this map of US soybean production:
APR. 5, 2018 6:00 AM