Further tension in global trade policy were heightened this week when President Trump on Thursday announced the targeting of approximately $60 billion in tariffs against Chinese goods under Section 301 of the Trade Act of 1974. The action is designed to create a more reciprocal trading arrangement with China. However, those in the agriculture industry fear that it will devastate a crucial market for U.S. agricultural products.
This action is separate from the U.S. plans to impose tariffs on steel and aluminum from China and other countries. Under Section 301 of the Trade Act, the U.S. Trade Representative initiated an investigation to determine whether China’s acts, policies and practices related to technology transfer, intellectual property and innovation are unreasonable, unjustifiable or discriminatory and burden or restrict U.S. commerce.
In announcing the action, Trump said the U.S. trade deficit with China is $375 billion or potentially as high as $504 billion, depending on how it is calculated, compared to the estimated $800 billion total trade deficit the U.S. has with the entire world. Trump said he’s seeking a $100 billion trade deficit reduction with China from these actions allowed under Section 301.
Members of the Trump Administration speaking at events and before Congress this week emphasized that its actions related to China are intended to improve the trading relationship over the long term but will likely involve short-term impacts, especially on agriculture.
U.S. Grains Council president and chief executive officer Tom Sleight said, "In the near term, we will continue our work to diversify the markets to which our products are exported, focused on sales that can support prices this crop year," he explained. "Based on our recent experience, we are well aware this work will be an uphill battle, because our reputation as a reliable supplier has come into question.”
Sleight added, "In the longer term, U.S. agriculture must have a stable and coherent trade policy to thrive. The world is watching what our country does next -- and markets have long memories. Agriculture is a positive contributor to the balance of trade, and the international marketplace offers the best available opportunity for growth in the U.S. agriculture sector and the U.S. economy as a whole.”
Ray Starling, special assistant to President Trump covering agriculture, speaking at an AgriPulse forum, said the Administration would do "everything within our power" to protect farmers but was not forthcoming with details on specific measures to protect agriculture exports.
Meanwhile, Gregg Doud, the newly-sworn-in chief agriculture negotiator at the Office of the U.S. Trade Representative (USTR), said the Trump Administration would continue to pursue cases against China at the World Trade Organization (WTO) focused on corn and other grain subsidies and tariff rate quotas (TRQs) affecting those products.
Just hours after the Trump Administration looked to target an additional $50 billion in tariffs on Chinese exports with its Section 301 designation, China took aim at President Trump’s tariffs on steel and aluminum with a list of reciprocal duties it is considering on $3 billion worth of U.S. exports of fruit, wine and pork.
An expanded list from China could be forthcoming in the next several weeks or months, but the initial list appears to place a 25% duty on U.S. pork and a 15% duty on steel pipes. Also included in the list is wine, apples and ethanol.
Bill Lapp, executive vice president of Advanced Economic Solutions, stated that some notable anticipated items missing from the list so far are soybeans, milo and Boeing jets.
“If the trade situation continues to deteriorate, our lives as farmers and ranchers will become more difficult. America’s farmers and ranchers export more than $21 billion of farm products to China – more than 20% of their production. After Canada, China is our second-largest customer for ag exports,” American Farm Bureau Federation president Zippy Duvall said.
“Farm income across commodities has fallen by about 50% over the past four years. Retaliation in the trade arena makes our outlook even worse,” Duvall warned. “This could not be happening at a worse time for American agriculture. We expect all countries to trade fairly, and we support enforcement of trade rules, but we also hope trade disputes can be resolved without harming an industry that is a bright spot on trade and is so important to rural America.”
During a Senate Finance Committee hearing on Thursday, USTR Ambassador Robert Lighthizer said the Office of the U.S. Trade Representative will begin consulting with the Trump administration and Congress as soon as next week to determine which countries the U.S. should pursue new free trade agreements with.
"If I have my way, it's not going to be a five-year negotiation," Lighthizer said. "It's going to be a focused negotiation, where we get something very quickly for agriculture as well as other parts of the U.S. economy and increase exports."
Senate Agriculture Committee Pat Roberts, R-Kan., stated some frustration that no new trade bills have come out of the new administration, and after 14 months some “frustration is just obvious.”
“We are in danger of losing our reputation as a reliable supplier,” Roberts said. “Once you lose that and [countries] start making agreements with other folks, you’re in a world of trouble.”