Other Voices: Soybean tariff would inflict broad pain

FF Editor
Farm Forum

The stakes are growing in America’s escalating trade war threats with China, and America’s soybean producers fear they may be caught in the middle.

And if they are, they won’t be alone.

Earlier this month, the Chinese government responded to President Donald Trump’s threat of imposing tariffs on some goods made in China by announcing a potential round of tariffs of its own, including a 25 percent tariff on U.S. soybean imports. With China serving as the world’s largest international consumer of American soybeans, such a tariff threat carries with it potentially devastating consequences.

The essential role of soybeans as a foodstuff and as a political tool cannot be understated. According to Bloomberg News, soybeans are a protein-rich source used for feed in raising livestock, and that is particularly important in China, where the demand for meat is on the rise. Also, Chinese officials worry that a volatile food market for its massive and growing population could fuel political unrest, and that makes soybeans even more crucial. So, this potential tariff carries a substantial risk for China, too.

This tariff threat comes at a precarious moment for American crop producers. With corn prices low, soybeans have been seen as an economic cushion for many farmers. (Last year, American farmers reportedly planted more soybeans than corn for the first time ever.) A tariff could cripple America’s soybean industry; in turn, it could be a windfall for Brazil, which combines with the U.S. to feed 85 percent of China’s soybean appetite, and the European Union. This would cost the U.S. a valuable share of a lucrative market.

What’s more, such a hit on U.S. producers would have broad economic consequences for rural America. Nearly a quarter of this country’s soybean crop is sold annually to China, the Wall Street Journal reported. Such a loss in ag revenues usually means farmers spend less, which means there is less money circulating in rural communities.

“In farming communities, that pain (from a soybean tariff) will filter down to other businesses so it’s not just agriculture that will get hit,” said Dan Kowalski, vice president of CoBank. “It’s going to be everything from the local co-op to local law firms.”

President Trump appears to acknowledge this, but even this could create problems. Trump responded to China’s soybean tariff threat by ordering the U.S. Agriculture Secretary Sonny Perdue “to use his broad authority to implement a plan to protect our farmers and agricultural interests.” That would strongly suggest more subsidization for soybean producers, which would almost certainly unleash criticism from other nations that already complain about the way the U.S. currently subsidizes its farmers, thus giving them what other nation’s claim is an unfair advantage in the global market.

Economist Intelligence Unit analyst Simon Baptist told CNBC, “It is basically impossible for the U.S. to be confident that any actions it takes will protect its agricultural sector from Chinese tariffs, given the ways that other countries will respond to it.”

The potential fallout from a Chinese tariff on soybeans could well have painful consequences for rural America. Perhaps all this is simply the Trump administration’s high-stakes attempt to draw China to the negotiating table to address trade issues that America (and other countries) have long had with Beijing. Or maybe there’s more behind it.

Either way, U.S. farmers — and rural America — are caught in the middle. And it’s generating storm clouds of uncertainty as planting season nears.

— Yankton Daily Press & Dakotan