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Top soybean producer Iowa reacts to Chinese tariffs proposal

China, U.S. go back-and-forth with new levies on foreign-made products

Justin Kiews operates a tractor pulling a Kinze 3600 planter as he plants soybeans on land farmed by Brent Adam near Packwood, Iowa, on Thursday, May 5, 2016. (Jim Slosiarek/The Gazette)
Justin Kiews operates a tractor pulling a Kinze 3600 planter as he plants soybeans on land farmed by Brent Adam near Packwood, Iowa, on Thursday, May 5, 2016. (Jim Slosiarek/The Gazette)

Iowa, the nation’s second-largest producer of soybeans, woke up Wednesday to news that China has proposed putting a tariff on one of its key crops.

Less than a day after the Trump administration released a list of $50 billion worth of Chinese goods it planned to put tariffs on, China responded with its own. The Chinese list included proposals to place a 25 percent levy on U.S. imports of soybeans, aircraft, chemicals and more.

“It’s not good for anybody. This is what I would call the nuclear option for both sides,” said Grant Kimberley, director of market development for the Iowa Soybean Association. “This is mutually assured destruction for both countries, going down this road.”

The announcement from China sent waves throughout financial markets in the United States. The Dow Jones industrial average opened almost 500 points lower Wednesday and prices for soybean futures were down almost 40 cents as of midday.

It also had Iowans worried about how the quick pace of tariff announcements would affect Iowa farmers already facing economic pressures.

“Times are hard enough on our farmers. Then to have China push back on tariffs on our soybeans and our ethanol ..., it’s very very worrisome. Farmers are upset and rightly so,” U.S. Sen. Joni Ernst, R-Iowa, said while in Tipton Wednesday.

Ernst said she had a call scheduled with President Donald Trump later in the day to discuss the tariffs.

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China is the top importer of soybeans in the world, using the oilseed to make animal feed, according to Reuters. U.S. soybean exports to China were valued at $12 billion last year, Reuters reported. Kimberley estimated that about 30 percent of U.S.-grown soybeans go to China. Iowa farmers produced more than 561.6 million bushels of soybeans last year, second only to Illinois.

John Heisdorffer, a Keota farmer and president of the American Soybean Association, said the series of escalating tariffs between the United States and China is starting to look like a trade war.

“Let’s hope things get settled down and there are some kind of negotiations and we don’t have an actual trade war. We don’t need this to expand any farther,” Heisdorffer said.

Neither set of tariffs goes into effect immediately. Companies in the United States have until May 22 to make comments on levies on Chinese goods, and China did not announce a specific date for its retaliatory tariffs, according to national news reports.

That means there still is time for the United States and China to de-escalate the tariff talk, Kimberley said.

“There’s a little bit of wiggle room, a little bit of time here, that I hope both sides will come back to the table and negotiate,” said Kimberley, who farms corns and soybeans northeast of Des Moines.

‘GOING TO MAKE A BAD SITUATION WORSE’

The proposed tariffs are coupled with others China announced on Monday, including levies on pork and ethanol — two other areas in which Iowa dominates in production.

Iowa State University economist Dave Swenson said the tariffs not only will interfere with prices Iowa farmers had expected to receive for their products, but with expected investments, such as new pork production plants across the state.

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In addition, farm income is expected to come in around $59.5 billion this year, down from 2016 and half what it was in 2013.

“What it’s doing on the farm sector is going to make a bad situation worse. That’s the consequences of this right now,” Swenson said.

Effects of the tariffs could ripple out to other industries, Swenson added, as farmers would have less money to spend on equipment and other supplies.

“The crops are going to go in, but discretionary expenditures, capital expenditures, those are the kind of expenditures that farmers are not going to be able to make or they’re going to have to put them off,” he said.

The United States also still is in re-negotiations over the North American Free Trade Agreement, a major trade deal with Canada and Mexico, the largest two recipients of exports from Iowa. Trump repeatedly has said he may move to cancel the agreement and has threatened to do so as a negotiating tactic with Mexico over immigration.

“Mexico is doing very little, if not NOTHING, at stopping people from flowing into Mexico through their Southern Border, and then into the U.S. They laugh at our dumb immigration laws. They must stop the big drug and people flows, or I will stop their cash cow, NAFTA. NEED WALL!” Trump tweeted Sunday.

The tariffs China announced Wednesday include a 25 percent duty on aircraft. While Iowa does not have any major aircraft manufacturers, companies such as Cedar Rapids-based Rockwell Collins are suppliers to those manufacturers and would be indirectly affected, ISU’s Swenson said.

‘CHINA NEEDS TO BE HELD ACCOUNTABLE’

Iowa lawmakers have said they are worried about how a trade war would affect the state. Many also have said this week they believe China should be held accountable for unfair trade practices, however.

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“The President’s across-the-broad actions have put Iowa’s farmers in the crosshairs as China has announced plans to impose retaliation tariffs on pork, soybeans and other products that are produced in Iowa. These actions would be catastrophic to our economy,” U.S. Rep. Dave Loebsack, D-Iowa, said in a statement to The Gazette.

“However, after years of illegal and unfair trading practices, I believe that China needs to be held accountable for their actions. President (Donald) Trump must open a dialogue with China and our other trading partners to find a narrower path forward that creates a win-win for both Iowa’s farmers and workers.”

China’s trade practices “has an impact on our economy and on manufacturing, so we need to figure out a way to hold them accountable,” Iowa Gov. Kim Reynolds, a Republican, said Monday. She added the United States needs “to make sure we don’t have unintended consequences by getting into a trade war.”

Reynolds added in a statement later that she’s in the process of reaching out to Terry Branstad, the former Iowa governor who is now U.S. ambassador to China, as well as others in the Trump administration.

Iowa’s senior U.S. senator, Republican Chuck Grassley, said Wednesday he warned Trump that China would retaliate against U.S. agriculture.

“The United States should take action to defend its interests when any foreign nation isn’t playing by the rules or refuses to police itself. But farmers and ranchers shouldn’t be expected to bear the brunt of retaliation for the entire country,” Grassley said in a statement.

Grassley also said the country needs to protect its intellectual property.

“On my recent congressional delegation trip to China, I urged Chinese government officials to rein in unfair trade practices and policies, including the theft of U.S. intellectual property, which have adversely impacted American businesses. I’m concerned that my urging fell on deaf ears,” Grassley said.

U.S. Rep. Rod Blum, R-Iowa, said he is supportive of “negotiating better trade deals for U.S. workers” but is “very aware that trade wars will most likely be detrimental” to Iowa.

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“I’ve taken every opportunity to inform the President and his administration that trade wars will disproportionately harm Iowa’s economy. I’m not assuming the worst, though as I am confident in President Donald Trump’s deal-making ability,” Blum said in an emailed statement.

Gazette reporters Erin Jordan and Mitchell Schmidt and Quad-City Times reporter Ed Tibbetts contributed to this article.

l Comments: (319) 398-8366; matthew.patane@thegazette.com

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