As a Minnesota farmer, Mike Peterson is accustomed to dealing with slumping crop prices or damage from volatile weather. He had no way to prepare, however, for the fallout from a trade war with China that has cost American growers access to one of their most lucrative markets.
“I’ll be the first to admit that I originally supported the effort to secure better trade agreements and to hold bad actors accountable,” Peterson told the House Agriculture Committee’s panel on farm commodities in early May. “But the approach to these trade disputes has caused damage that I’m afraid it’ll take us decades to overcome.”
Peterson’s outlook is increasingly common among U.S. farmers, many of whom reside in states that President Trump won in 2016 and will need to carry in order to keep the White House in 2020.
Some of them describe the current agricultural economy as the worst since the 1980s, an era when farm foreclosures touched record highs amid soaring interest rates, dwindling crop prices, and an embargo on crop sales to the Soviet Union ordered by former President Jimmy Carter.
[Related: Businesses begin planning supply chain shake-ups in case Trump China tariffs stick]
They place much of the blame on Trump’s tariffs on $250 billion of Chinese imports in 2018, some of which were doubled this month, and Beijing’s retaliatory duties on American exports originating in states that supported the president.
The value of American crop shipments to China tumbled 25% to $16.3 billion in the year through Sept. 30, 2018, and may dip to $9 billion by the end of this September, according to the Congressional Research Service. Exports of about $12 billion worth of soybeans to China, where they are used in animal feed, essentially halted after the tariffs.
“These are certainly some of the roughest financial times we’ve seen in agriculture” in three decades, Michelle Jones, a fourth-generation farmer whose family works 10,000 acres in south-central Montana, told the Washington Examiner.
The main difference, she said, is that interest rates for credit lines that fund farm operations until payments come in after harvest are 4% to 6% now, compared to as much as 15% in the 1980s.
[Also read: Schumer backs Trump on China tariffs]
Congress can help, she said, by ratifying the U.S.-Mexico-Canada Agreement, Trump’s replacement for the Clinton-era North American Free Trade Agreement, to stabilize agriculture markets. Next, the administration should finalize a trade agreement with China, a market growers had hoped to cultivate rather than lose entirely, she said.
“The tariffs, they have to be lifted to even begin normalizing the relationships,” Jones added. “Once you lose market share, it takes a very long time to regain market share.”
Until that happens, U.S. farmers are grappling with tumbling prices that, at best, erode profit margins and often leave them operating in the red. Soybean prices have fallen 18% in the past year alone, to $8.36 a bushel, while cotton has tumbled 21% to 66 cents a pound. Corn has dropped 25%.
“We’ve just started our spring planting without any assurance that we’re going to have an opportunity to lock in a feasible price,” said Peterson, who farms about 800 acres of corn and soybeans outside of Northfield. “If our markets don’t come back and we don’t have any additional support, we’d be better off not producing.”
[Read: White House agrees to lift steel, aluminum tariffs on Mexico, Canada]
While the Trump administration attempted to help farmers by directing $12 billion toward growers most affected by China’s response, that didn’t cover the entire loss. The doubt about how long it might take to reestablish markets for U.S. goods in China only worsens the pain.
Trump, meanwhile, has argued repeatedly that the current and prospective duties on China will bring in $100 billion from the country, some of which he can use to buy products from U.S. growers.
“We’re going to take the highest year, the biggest purchase that China has ever made with our farmers, which is about $15 billion, and do something reciprocal to our farmers,” he told reporters on May 13, three days after the latest tariff increase. “So our farmers will be very happy. Our manufacturers will be very happy. And our government is very happy because we’re taking in tens of billions of dollars.”
The money the government is bringing in, however, comes from U.S. importers — some of them farmers — who pay the tariffs to customs officials when their orders arrive in port, a fact that businesses are both keenly aware of and unhappy with.
“It’s one thing to be tough on China’s unfair and illegal trade practices, but the longer this disastrous lack of a strategy continues, the more it’ll cost and the more of an impact it will have on Virginians’ bank accounts,” the state’s two Democratic senators, Mark Warner and Tim Kaine, said in a statement.
China is the top export market for Virginia soybeans, according to the commonwealth’s Department of Agriculture and Consumer Services, and the value of its shipments fell 83% to $58 million last year.
Virginia soybean farmers, the senators said, “brace for the worst every time the word ‘tariffs’ is said in the Oval Office.”
The prospect of a trade agreement between Washington and Beijing, which prompted Trump to leave tariffs on $200 billion of Chinese imports at 10% for several months, dimmed this month when the administration said Beijing had backtracked on key elements of the deal.
The president responded by raising the duties to 25%, effective May 10, and laying the groundwork for tariffs of the same size on the remaining $300 billion in Chinese goods purchased by the U.S.
Chinese President Xi Jinping responded on May 13, tacking levies onto another $60 billion in U.S. goods.
As soon as Trump tweeted his plans to raise the tariffs on May 5, the value of unpriced crops on Brent Bible’s 5,000 acres of corn and soybeans outside of Lafayette, Ind., dropped about $50,000, the grower said. At the same time, the trade war has driven up the price of farm equipment.
It’s a double-whammy that reminds Bible of former President John F. Kennedy’s statement that “the farmer is the only man in our economy who buys everything at retail, sells everything at wholesale, and pays the freight both ways.”
U.S. growers, he said, now run the risk of losing the Chinese market entirely, since the tariffs have forced the country’s importers to buy elsewhere, a practice with which they may grow increasingly comfortable over time.
“The further time goes on and they’re able to continue to do that, the reliable market that we’ve always been is eroding away,” Bible said. “Normally, our competitive advantage has been that we are a reliable source of products. This has taken that away.”
Without markets, there’s no way to turn a profit, said Peterson, the Minnesota grower.
“I have a 23-year-old son who’s purchasing his own 80-acre farm a few acres from ours, and I’m doing everything I can to prepare him for the challenges,” he said. “I want my son to have the reason to apply his energy and skills into the family farming tradition, but if we want the next generation to get into farming, we have to at least give them a fighting chance.”
