Mississippi River Mayors Sound Tariff Alarm
Mayors of Mississippi River cities are warning that China’s tariffs on U.S. farm products, especially soybeans, made in response to the Trump administration’s tariffs on a range of Chinese products, could have major negative impacts to the farming economy and sectors that depend on it, including river transportation.
Several Mississippi River towns, along with the president of the American Soybean Association, held a teleconference with media on July 6, the day that the Trump administration’s tariffs on $34 billion worth of Chinese goods took effect. China immediately said it would be forced to retaliate and has previously said it would target soybeans and other American farm products. China is the both the world’s and America’s top market for export soybeans.
The mayors of Grafton, Ill.; Davenport, Iowa; St. Gabriel, La.; and West Helena, Ark., all participated in the conference call, along with John Heisdorffer, president of the American Soybean Association and s soy farmer himself from Keota, Iowa. The call was hosted by Mississippi River Cities & Towns Initiative (MRCTI), a coalition of cities along the Mississippi River corridor.
The Trump administration levied the tariffs in response to what it has long claimed are unfair and discriminatory trade practices by China that result in an artificially high U.S. trade deficit. While trade observers agree about China’s practices, many do not agree that unilateral tariffs are the correct way to deal with them. Many had hoped that jockeying over trade by China and the U.S. would result in a revised trade settlement before tariffs took effect, but that did not happen despite some encouraging moves, such as China’s announcement that it would accept more American autos.
The mayors say they are not sure what the administration’s tariffs are trying to accomplish. Heisdorffer said that one out of every three rows of American soybeans goes to China—about 60 percent of America’s annual soy crops, or 27 million tons in 2017, worth about $14 billion a year. “Agriculture, and soybeans in particular, is one of the few export areas that has a positive balance of payments with China,” he said. Agriculture generates about $33 billion in revenue annually. Half of the soy-producing states are located along the Mississippi River.
But despite several record harvest years, he said, American farmers have been losing income over the past four years, because of droughts and floods as well as lower prices due to competition from Brazil and other soy producers. He said farmers are expecting a further 7 percent reduction in income this year. “We will end up with lower prices if a 25 percent tariff on U.S. soybeans is implemented today,” he said.
Mayor Frank Klipsch of Davenport said that it’s not a question of only farmers being affected, but of all the industries that depend on them, including the freight industry. He used the term “scorched earth” to describe the tariff approach.
Mayor Lionel Johnson of the city of St. Gabriel, La., said his state would be hardest hit. Although about a million acres of soybeans a year are exported out of Louisiana, he said, “That’s not because we are the top soy producers, but because we are the export gateway to China and the rest of the world.” Johnson added, “I know a farmer who works 250 acres who is looking at a loss of between $150,000 and $200,000 this year.”
Mayor Jay Hollowell of West Helena, Ark., noted that his state is the top soy producer in the Lower Mississippi basin, and said that more than 20,000 Arkansas jobs depend on soy exports alone. Hollowell cited a study by the American Manufacturing Association released in April that said that while “manufacturers agree with President Trump that China’s theft of American intellectual property and their use of unfair trade practices represent clear threats to manufacturers’ competitiveness,” tariffs “are likely to create new challenges in the form of significant added costs for manufacturers and American consumers.” Furthermore, the study said, they ”run the risk of provoking China to take further destructive actions against American manufacturing workers.”
Mike McGinnis, who reports for Successful Farming magazine, said commodity analysts he had recently spoken with believe that even if China buys all of Brazil’s soy crop, its needs will still require it to buy some American soybeans, tariffs included. “This is a tariff, not an embargo,” he said.
When asked whether China could completely forego American soybeans, even with tariffs, Heisdorffer responded that he had recently visited the Brazilian province of Mato Grosso and noted vast improvements in storage and transportation from 15 years ago. “There are 18 million acres in Mato Grosso that can still be opened up for soy cultivation. There’s no reason why Brazil couldn’t take our export soy market away from us.”
When asked what next steps river mayors are contemplating, Colin Wellenkamp, MRCTI’s executive director, said that the mayors are having intensive talks with their congressional delegations.
Despite the tariff deadline, soybean futures were up 10 percent on July 6, according to CME Group, a trading company.
The day before, July 5, Mexico completed its second round of retaliatory measures against U.S. tariffs on steel and aluminum, installing additional duties of 20 percent to 25 percent on several U.S. meat and dairy exports. Mexico is now collecting retaliatory tariffs of 20 percent on U.S. exports of fresh and frozen pork hams and shoulders. Mexico’s tariffs retaliate for U.S. global tariffs of 25 percent for steel and 10 percent for aluminum, which took effect June 1 for Mexico, Canada and the European Union. Mexico also is collecting retaliatory tariffs of 25 percent on U.S. exports of cheese products.