The ‘largest trade war in history’: Local farmers brace for impact as China, U.S. increase tariffs

July 6, 2018 12:28 PM

Christina Lorey,

Posted: July 6, 2018 12:28 PM

Updated: August 31, 2021 12:25 PM

by Christina Lorey

Overnight, the Trump administration imposed an additional $34 billion in tariffs on Chinese exports. Now, Wisconsin farms are bracing for impact, as the U.S. and China are set to slide deeper into a trade war. Friday morning, China announced they retaliated immediately.

Wisconsin’s soybean farmers are expected to be hit the hardest and the fastest. The U.S. exports 30 percent of the soybeans it grows to China every year. Wisconsin farmers exported $7.2 million worth of the crop in 2017.

With new tariffs in effect, China is expected to stop importing U.S. soybeans altogether and start getting them from other countries. That’s a problem for farmers since the amount of soybeans and corn they have to sell this year is already set because farmers make planting decisions at the beginning of the year.

Without exporting to China, farmers will need to sell those products domestically, flooding the market. Prices are expected to drop, and the state’s economy would take a hit as a result.

“You have the direct effect that happens at the farm,” said Mark Stephenson, Director of Dairy Policy at the University of Wisconsin. “Then you have the indirect effect that happens to the labor that they hire for example or the dollars that they spend at their local feed store or vet. And then you have the next effect, which is what those people who earn those dollars from the farm spend in their community on health care, groceries, and other things.”

China’s new tariffs target soybeans, cotton, and pork, which threatens U.S. farmers in many of the states that voted for President Trump, from Texas and Iowa to Wisconsin.

American pork producers say they’ve been asked to “be good patriots” as the latest round of tariffs goes into effect. But many say they cannot afford to take a financial hit and potentially put their business and livelihood on the line at the expense of an escalating trade war.

Much of the damage locally has already been done. “We’ve already had impacts,” said Stephenson. “They are going to be long-term and possible permanent in nature. Part of the reason for that is the concerns that other countries have about the tariffs that are being waged on them has caused them to look for other suppliers.”

Stephenson said one recent example of this is Mexico, who the U.S. leveraged tariffs against and received tariffs in return. Now, local dairy producers have lost out on business to cheaper producers from the European Union.

“This is a little bit like playing that game of musical chairs. Someone has taken your seat at the location, so you can maybe run around and find another customer in another country that we’re not having a trade war with,” said Stephenson. “But it’s highly inefficient to run around and look for new customers.”

Wisconsin’s dairy industry could also be in jeopardy after the expected retaliatory tariffs. Wholesale cheese and butter prices have already started to slump in recent weeks, as buyers and sellers worry about the effect on new tariffs on dairy products. With the collapsed prices of milk, grain, and other commodities, farmers are losing money no matter how many 16-hour days they put in milking cows, caring for livestock, and planting and harvesting crops.

Wisconsin lost 500 dairy farms in 2017, and about 150 quit milking cows so far this year. The total number of milk-cow herds is now around 7,600 in Wisconsin, down 20 percent from five years ago.

Problems for local farmers are only expected to escalate the longer the trade war lasts. The Wisconsin Farm Bureau said local dairy farmers don’t have much financial staying power left after more than three years of depressed prices.