By Charlie Schlenker
Donald Trump promised increased tariffs on the campaign trail. As president-elect he's doubled down on the pledge, targeting Canada, Mexico, and once again China. Illinois agriculture organizations still hope he doesn't mean it.
Trump's first term was pretty good for farmers on tax policy, not so much on trade policy. Tariffs imposed on China prompted a backlash that cost global market share for farmers like Ryan Frieders of Waterman, Illinois.
“It was pretty detrimental to the soybean market as a U.S. farmer,” said Frieders, who sits on the government relations committee for the Bloomington-based Illinois Soybean Association.
Farm groups understand there are players and practices in the global market that need to be addressed, but corn, beef, and pork have taken hits, said Ryan Whitehouse, director of national legislation for the Illinois Farm Bureau, also based in Bloomington.
“Slapping just tariffs, it is a little scary to a farmer. We hesitate a little bit here at Illinois Farm Bureau when we hear we’ll just tariff other countries because we know who is going to take that first and it’s going to be the Illinois farmer and the American farmer through retaliatory tariffs. We don’t need anything else to hurt the farm economy. The farm economy is struggling right now,” said Whitehouse.
The USDA Economic Research Service estimated retaliatory tariffs on U.S. agriculture product and food exports dropped by $27 billion from mid-year in 2018 to the end of 2019. Iowa, Illinois, and Kansas amounted to more than half the total decline.
Agriculture groups hope the promised trade restrictions will be brief.
Rodney Weinzierl farms near Stanford in McLean County. He’s the executive director of the Illinois Corn Growers Association. Weinzierl said a second Trump administration could use the tariffs as a lever to address unfair trade practices other countries exert on the U.S.
“And it’s used as kind of a bargaining step to get them at the table to get something worked out rather than kind of a therapeutic tariff that goes on a really long time with kind of no bargaining, of trying to resolve it,” said Weinzierl.
Frieders seconds Weinzierl's idea.
“I think president-elect Trump is a very smart businessman and I think he is not afraid to use tariffs if he needs to as we have seen in the past, but hopefully it could be a tactic to just bring people back to the tables,” said Frieders.
And some of the trade practices the U.S. criticized as unfair go beyond tech, manufacturing, and consumer goods. There are ag-specific barriers farmers would like the Trump administration to take on.
“When we import products from other countries like a Brazil, when we import ethanol at zero tariff from them, but they slap an 18% tariff on our ethanol, that’s an unfair practice,” said Whitehouse.
Recent history suggests the effect of tariffs could be long-lasting regardless of how long they last. Frieders acknowledged that after U.S. tariffs, China has continued to buy some soybeans, but has largely transferred its buying to South American countries.
“It has not come back. We have not regained our market share with that market,” said Frieders.
Part of the reason is U.S. trade restrictions on China have continued and vice versa. Weinzierl of the Bloomington-based Corn Growers said another piece is that nations want to make sure their food supply is coming from a secure source. When the U.S. hit China, China invested in countries like Brazil to build infrastructure for more row crop production.
“And so that would be in particular an area that could have potentially a long negative effect,” said Weinzierl.
Brazil and other South American countries also are boosting their own production capacity by clearing forest for farmland, though low commodities prices have curbed that explosive growth for now.
Weinzierl said it's hard to predict whether the row crop market share loss will be permanent.
“You continue to see expansion of especially meat consumption in developing countries throughout southeast Asia. You will see continued meat exports or grain exports for those countries to raise livestock,” he said.
If not China, ag groups hope the incoming administration will look to open new markets and create free trade agreements with more partners around the world. Frieders said it's crucial for Illinois — 60% of soybeans in the U.S. are exported and because of the river transportation network it’s even higher here.
“We’ve been focusing a lot of our efforts on Egypt and north Africa. That would be a great market for us to be able to expand into. And then Asia, continuing not only to include China, but to include other countries in Asia where their protein sources are changing and they’re needing some of our soybeans to maybe feed some of their aquaculture or poultry,” said Frieders.
Frieders noted the House version of the tentative Farm Bill re-authorization does double dollars allocated for market access and trade promotion.
In the first Trump administration, the government did make efforts to mitigate the impact of trade barriers on farmers. The U.S. Department of Agriculture calculated Market Facilitation Payments, or MFPs, to farmers on a per-county basis. Those payments didn't make farmers whole, but the farm bureau's Whitehouse said they were absolutely necessary.
“There have been no talks about MFP-2 yet. We in the ag sector are kind of sitting on the edge of our chair waiting to see how much of the talk was political rhetoric and campaign rhetoric and how much is going to be implemented,” said Whitehouse.
At this point Whitehouse said ag groups hesitate to ask for direct payments and they're doing everything they can to encourage the incoming administration to open up markets and that tariffs, if imposed, need to be thoughtful and targeted not willy-nilly.
“It hurts American agriculture and the farmer and the rural way of life because if the American farmer is hurting, a lot of small towns struggle, too,” he said.
Click here to see more...