May 11, 2018
China’s proposed 25% tariff on U.S. soybeans would hit Iowa’s economy the hardest of any state, even though Iowa isn’t the largest U.S. soybean grower, says a new report. Moody’s Investors Service issued an analysis this week, noting that Iowa exported nearly $2 billion of soybeans to China in 2016, which is about 4% of the state’s economy, the largest exposure of any state in the nation.
China is the largest purchaser of U.S. soybeans, buying $14 billion worth from the U.S. last year. China has proposed putting 25% tariffs on $50 billion of U.S. products including pork, soybeans, corn and beef. China’s plan is in response to President Donald Trump’s proposed tariffs on U.S. imports of Chinese steel, aluminum and electronics, among other products.
While Iowa would be hit hardest by China’s soybean tariff, Missouri would be second nationally. Missouri soybeans sold to China contribute about 1.1% to that state’s revenue. Illinois produced the most soybeans last year, but only about 1% of the Illinois economy comes from soybean exports to China.
State revenues would be hurt
The tariffs would add to Iowa’s budget woes, as the state’s farm economy has continued to decline due to low commodity prices. “These tariffs would not be good for state revenues and would have a depressing effect on agriculture,” says Marcia Van Wagner, a Moody’s vice president.
Iowa’s farm income has already declined by nearly 75% over the past five years to $2.5 billion. Iowa State University economist Chad Hart says farm income has finally stabilized, and hopefully it will stabilize the state’s economy as well. “However,” he adds, “if these proposed tariffs are carried out, then we’ll see another step down in farm income and that would adversely affect state revenue.”
The Moody’s report was released as China canceled nearly 200,000 metric tons of U.S. soybean purchases of 2017 crop beans this week. Hart and other economists note that China is buying beans ahead, to be harvested this fall. The 2018 crop is being planted now and China is hoping the two nations will have resolved their trade disputes by harvest. Last month, China bought 387,000 metric tons of U.S. soybeans for the marketing year beginning Sept. 1, 2018.
Administration urged to settle dispute
Iowa Gov. Kim Reynolds, Iowa Secretary of Agriculture Mike Naig and 10 agriculture leaders from across the state sent a letter this week to U.S. Trade Representative Robert Lighthizer, urging him to quickly resolve the Section 301 trade dispute with China. The Trump administration is accepting public comments through May 11.
“Iowa has spoken with a unified voice on the importance of trade to our state’s farmers and manufacturers. There are real challenges in our trade relationship with China, but the consequences of an ongoing dispute are equally real and would disproportionally impact our state’s farmers. It is critically important the administration moves quickly to resolve these issues,” Naig said.
Letter to Trump administration
The full letter follows here:
May 10, 2018
Ambassador Robert E. Lighthizer
Office of the United States Trade Representative
600 17th Street NW
Washington, DC 20508
RE: Docket ID Number USTR-2018-0005
Dear Ambassador Lighthizer:
The state of Iowa requests that you take urgent action to resolve the Section 301 trade dispute with China in a way that protects farmers, manufacturers and our state’s economy.
Trade is vitally important to the health of Iowa’s economy. In 2017, Iowa exported more than $13.2 billion in manufactured goods and value-added agricultural products to 185 countries. The agricultural products coming out of Iowa contribute to one of the country’s few trade surpluses. Actions that limit our access to export markets risk adding to the U.S. trade imbalance.
Here in Iowa, we know that our products are some of the best in the world. For our farmers to be successful, we need to grow — not contract — our markets.
China is an extremely important market for our state. One-third of our state’s $5 billion soybean crop is exported to China. The U.S. exports more than $1 billion of pork to China and Iowa farmers are responsible for 30% of our country’s pork production. The China market was just recently reopened to U.S. beef after more than 15 years of delays and is a tremendous potential market for the 4 million head of cattle being cared for in our state. They continue to raise baseless barriers to poultry trade, to the detriment of Iowa producers. Iowa also leads the nation in corn and ethanol production, both now facing additional trade barriers.
Agricultural products grown and raised here in Iowa and across the heartland have unjustly been placed at the center of this trade dispute, creating significant concerns and market uncertainty.
Many Iowa-based manufacturers have already been adversely affected by the tariffs that have been imposed. Companies across the state, whether they are large companies with a global footprint or smaller, family-owned businesses are already being negatively impacted.
We recognize there are challenges to our trade relationship with China, including but not limited to forced technology transfer, intellectual property protection and biotech trait approval delays. China has proven to be a bad actor on numerous occasions and we support the administration’s commitment to ensuring fair access for our products and fair treatment for our businesses.
However, the potential negative impact on Iowa would be dramatic if this dispute with China is not resolved quickly. In the short-term, we face volatility and uncertainty in our commodity markets. Longer-term, we risk losing market share and damaging this important trade relationship that we have spent decades building.
In addition, the potential damage to export markets comes at a particularly difficult time for our agricultural economy, with depressed commodity prices already adding uncertainty for farmers as they head into the 2018 planting season. Any new trade barriers would create additional hurdles to improving agricultural profitability.
The state of Iowa is a globally-recognized, highly productive agricultural state that depends on open access to international markets. We urge you to resolve this trade dispute swiftly and in a manner that does not put Iowa farmers and manufacturers in the crosshairs. Our people and our economy depend on it.
Kim Reynolds, governor of Iowa
Mike Naig, Iowa secretary of agriculture
Craig Hill, president, Iowa Farm Bureau Federation
Joel Brinkmeyer, CEO, Agribusiness Association of Iowa
Matt Deppe, CEO, Iowa Cattlemen's Association
Mark Recker, president, Iowa Corn Growers Association
Pat McGonegle, CEO, Iowa Pork Producers Association
Kevin Stiles, CEO, Iowa Poultry Association
Monte Shaw, executive director, Iowa Renewable Fuels Association
Bill Shipley, president, Iowa Soybean Association
Larry Shover, president, Iowa State Dairy Association
Gretta Irwin, executive director, Iowa Turkey Federation
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