Tariff tiff: Midwest braces; who blinks first?
BUSINESS RECORD STAFF Apr 5, 2018 | 4:23 pm
2 min read time
396 wordsAll Latest News, Economic DevelopmentThe U.S. vs. China tariff tiff has caught the Midwest — and the markets — in a squeeze of anxiety with many observers wondering which side will blink first.
Reuters reports that China is now considering a 25 percent tariff on $12 billion of U.S. soybeans — a direct hit in Iowa, which is one of the top producers and exporters of the legume. But National Public Radio spoke with sources who say China would make that move only as a last resort because the Chinese consume large amounts of soy and would have no interest in higher prices. The same logic applies to pork, on which China applied new tariffs this week.
U.S. pork producers have struggled even to break even as prices lagged. NPR interviewed Howard Hill, a Nevada, Iowa, farmer who sells about a quarter of the 7,000 hogs he markets in a year overseas.
The National Pork Producers Council reports that 26 percent of U.S. pork is exported. China was among the biggest customers, buying $1.1 billion of U.S. pork last year. Hill told NPR that Chinese businesses often also buy hog organs and skin that previously weren’t marketable, boosting farmers’ income.
Iowa State University economist Wendong Zhang told NPR that the Chinese may be bluffing on the soybean tariff. “It will hurt them a lot,” he said. “I feel that could be one of the nuclear options that they reserve as a last resort. They don’t want to use it because it’s hard to find substitutes.”
Soybeans are expected to overtake corn as the most widely planted crop in the United States.
Manufacturing is another industry caught in the trade fight that was prompted by President Donald Trump’s belief that the U.S. is getting a bad deal in trade with China and other nations. Trump applied a 25 percent tariff to Chinese goods.
The New York Times reported that manufacturing — which is Iowa’s top economic engine — could lose steam just as it started gaining momentum.
“If you want to spare the consumer so you don’t get this massive backlash against your tariffs, then there goes manufacturing, because that’s what’s left,” Monica de Bolle, an economist at the Peterson Institute for International Economics, told the Times. “The irony is, you cannot spare manufacturing from anything because manufacturing is globally integrated. The sector sources its parts and components from all over the world.”