COLUMBUS, Ohio — An Ohio farmer could lose more than half of his or her annual net income if China follows through with its own set of trade tariffs, which it vowed to do June 15, in response to $50 billion in tariffs imposed by U.S. President Donald Trump.
China has not said specifically what products will be targeted, but earlier this year suggested a 25 percent tariff on U.S. soybeans and other products.
Researchers with Ohio State University’s agriculture college have projected a 59 percent loss in annual net farm income based on historical trends in yields on corn and soybeans and projections for price drops in both commodities.
The Chinese say they don’t want a trade war — but given no choice — they will respond.
“The Chinese side doesn’t want to fight a trade war, but facing the shortsightedness of the U.S. side, China has to fight back strongly,” the Chinese Commerce Ministry said in a statement. “We will immediately introduce the same scale and equal taxation measures, and all economic and trade achievements reached by the two sides will be invalidated.”
Across Ohio, the loss of soybean exports to China would be an estimated $241 million annually.
“There are farmers who are struggling across the state,” said Ben Brown, manager of the ag college’s farm management program. “If the proposed tariffs go into effect, we’re going to have farmers who will have to exit the industry.”
For the study, the researchers compiled data from six Ohio corn and soybean farms of similar size and created a representative Ohio farm comprised of 1,100 acres split evenly between corn and soybeans.
They used the representative farm to determine the financial toll a tariff could take on an Ohio farm. Net annual income on that representative Ohio farm was projected to drop from $63,577 to $26,107 under the proposed tariff, according to the study, which was also conducted by OSU ag economist Ian Sheldon.
The Ohio Soybean Association denounced the White House’s action, predicting it would lead to signifcant losses to Ohio’s farmers.
“We should address our trade challenges by increasing our competitiveness, not creating new barriers,” said Allen Armstrong, OSA president and Clark County soybean farmer. “Exports have been one of the few bright spots for farmers in recent years, and we can’t afford another hit to the bottom line.”
Trump’s tariffs were imposed in response to complaints that Beijing steals or pressures foreign companies to hand over technology. American officials say they target products that might benefit from Chinese industrial policies they say violate Beijing’s free-trade commitments.
The financial losses to farmers stem from an expected drop in Chinese demand for U.S. soybeans and corn and in the world price for both crops.
“The biggest impact will be on profits from soybeans, however, corn is affected too,” Brown said.
Soybeans are Ohio’s largest crop and the state’s top agricultural export. In April, China announced it would impose a 25 percent tariff on U.S. soybeans, corn and over 100 other American products, in response to the tariffs that the administration proposed on a range of Chinese imports valued at $50 billion
Other international trading partners, including Canada, the European Union, and Mexico, have recently announced retaliatory tariffs in response to U.S. tariffs on steel and aluminum imports as well, that could also dip into the profits of Ohio farmers.
The losses from soybeans sales are projected to be far greater than for corn. Every year, 31 percent of the soybeans and 2 percent of the corn Ohio produces are exported to China. China is the largest buyer of soybeans in the world, and Brazil is its top supplier with the United States being second.
“The U.S. remains the largest producers of soybeans, but it is safe to say that Brazil could become the number one producer of soybeans in the world with increased demand for their products,” said Brown.
Reduced exports. A study by Purdue University economists predicts that soybean exports to China could drop by as much as 65 percent if China imposes a retaliatory 25 percent tariff on U.S. soybeans.
Davie Stephens, Kentucky soybean grower and vice president of ASA, is among growers distraught over the newly-announced tariffs, and China’s possible retaliation.
“Crop prices have dropped 40 percent in the last five years, and farm income is down 50 percent compared to 2013. As a soy grower, I depend on trade with China. China imports roughly 60 percent of total U.S. soybean exports, representing nearly 1 in 3 rows of harvested soybeans,” Stephens said.
The Office of the U.S. Trade Representative (USTR) has released a revised list of Chinese goods subject to the additional 25 percent tariff stemming from concerns over intellectual property theft and technology transfers. U.S. Customs and Border Protection will begin collecting the additional duties on the bulk of that list beginning July 6.