In tit for tat, Trump threatens more tariffs against China

President Donald Trump June 18 directed the U.S. Trade Representative to prepare new tariffs on $200 billion in Chinese imports as the two nations move closer to a potential trade war.

Meanwhile, wheat and soybean producer groups expressed their outrage by the move, but only to a measure of degree so as not to anger some members who are staunchly a part of Trump’s loyal base that voted for him in November 2016 and would agree with him no matter what happens.

The tariffs, which Trump wants set at a 10 percent rate, would be the latest round of punitive measures in an escalating dispute over the large trade imbalance between the two countries. Trump recently ordered tariffs on $50 billion in Chinese goods in retaliation for intellectual property theft. The tariffs were quickly matched by China on U.S. exports, a move that drew the president’s ire.

“China apparently has no intention of changing its unfair practices related to the acquisition of American intellectual property and technology,” Trump said in a statement June 18 announcing the new action. “Rather than altering those practices, it is now threatening United States companies, workers and farmers who have done nothing wrong.”

Trump added: “These tariffs will go into effect if China refuses to change its practices, and also if it insists on going forward with the new tariffs that it has recently announced.”

China’s Commerce Ministry June 19 criticized the latest threat of tariffs, saying it was an “act of extreme pressure and blackmail that deviates from the consensus reached by both parties after many negotiations, and is a disappointment to the international community.”

“If the U.S. becomes irrational and issues this list, China will have no choice but to adopt strong countermeasures of the same amount and quality,” the ministry statement said.

Trump said that if China responds to this fresh round of tariffs, then he will move to counter “by pursuing additional tariffs on another $200 billion of goods.”

It wasn’t immediately clear when the new tariffs could be put in place, as the trade office has yet to identify the Chinese goods to be penalized or conduct a legal review. The first round of penalties announced by both nations is set to take effect July 6.

The intellectual property sanctions were the latest in a spate of protectionist measures unveiled by Trump in recent months that included tariffs on steel and aluminum imports to the U.S. and a tough rhetoric on trade negotiations from North America to Asia.

The escalation in the dispute with China may also serve as a warning to other trading partners with whom Trump has been feuding, including Canada and the European Union. 

Free fall in farm crops

The American Soybean Association said the tit-for-tat move on tariffs deepen the likely free fall in prices that producers of soy and soy products are feeling directly in their wallets and which threaten the stability of their market long-term.

“Soybean prices are declining as a direct result of this trade feud,” ASA President John Heisdorffer, an Iowa soybean grower, said in a statement.

“Prices are down almost a dollar and a half per bushel since the end of May, and continue to plummet. That represents a loss of more than $6.0 billion on the 2018 soybean crop in less than a month. We have approached the Trump administration repeatedly and implored them to hear our side of this story.”

In 2017, China imported 60 percent of total U.S. soybean exports, representing nearly one in three rows of harvested soybeans, with a value of $14 billion, according to ASA.

The trade tensions, are making ASA “disappointed and highly concerned” that trade tensions between the U.S. and China are ratcheting up rather than deescalating and that its repeated requests to the Trump administration for a non-tariff solution that does not threaten the market stability and livelihoods of soy growers has not been put forward.

Wheat growers urge negotiation

The National Association of Wheat Growers and U.S. Wheat Associates issued a joint statement with the opening line: “The familiar African proverb says that when elephants fight, it is the grass that suffers. Unfortunately for America’s farmers, that grass is the wheat growing in their fields as the big guys in Washington, D.C., and Beijing escalate their trade fight.”

The wheat industry release said China’s state-run importing agency and private flour millers bought an average of more than 1.1 million metric tons of U.S. wheat the past five years because U.S. farmers produce higher quality grain than China can grow on its own.

“In a trade war, agriculture always gets hit first and the effects of these tariffs could prove devastating for farmers,” the NAWG/USW statement said. “No one in China will be hurt if the retaliatory U.S. wheat tariff is implemented. China has huge amounts of stored wheat and they can purchase what they need from Australia, Canada or even Kazakhstan, although Chinese consumers will miss the opportunity to experience higher quality products made from U.S. wheat.

“Instead, the outcome is likely to further erode the incomes of farm families who strongly support addressing the real concerns about China’s trade policies.”

Despite criticism from two farm groups, the move toward increased tariffs still has supporters, such as former Trump senior adviser Steve Bannon, who told The Associated Press, “President Trump told China and the world tonight that America will not back down when it comes to economic aggression.”

Rough waters possible

But Wall Street has viewed the escalating trade tensions with wariness, fearful they could strangle the economic growth achieved during Trump’s watch. Gary Cohn, Trump’s former top economic adviser, said last week that a “tariff battle” could result in price inflation and consumer debt—“historic ingredients for an economic slowdown.”

Trump’s comments came hours after the top U.S. diplomat accused China of engaging in “predatory economics 101” and an “unprecedented level of larceny” of intellectual property. 

Pompeo weighs in

Secretary of State Mike Pompeo made the remarks at the Detroit Economic Club as global markets reacted to trade tensions between the U.S. and China.

He said China’s recent claims of “openness and globalization” are “a joke.” He added that China is a “predatory economic government” that is “long overdue in being tackled,” matters that include IP theft and Chinese steel and aluminum flooding the U.S. market.

“Everyone knows … China is the main perpetrator,” he said. “It’s an unprecedented level of larceny.”

“Just ask yourself: Would China have allowed America to do to it what China has done to America?” he said later. “This is predatory economics 101.”

Asked to comment on Pompeo’s remarks, the Chinese foreign ministry in Beijing said in a regular briefing with reporters that the U.S. had lost credibility as a free trader.

“We don’t want a trade war, but we’re not afraid of a trade war,” ministry spokesman Geng Shuang said.

Pompeo raised the trade issue directly with China last week, when he met in Beijing with President Xi Jinping and others.

“I reminded him that’s not fair competition,” Pompeo said.

Trump had announced a 25 percent tariff on up to $50 billion in Chinese imports. China is retaliating by raising import duties on $34 billion worth of American goods, including soybeans, electric cars and whiskey. Trump also has slapped tariffs on steel and aluminum imports from Canada, Mexico and European allies.

Pompeo June 18 described U.S. actions as “economic diplomacy,” which, when done right, strengthens national security and international alliances, he added.

“We use American power, economic might and influence as a tool of economic policy,” he said. “We do our best to call out unfair economic behaviors as well.”

In a statement, Trump says he has an “excellent relationship” with Xi, “but the United States will no longer be taken advantage of on trade by China and other countries in the world.”

The two wheat organizations say they are not in the business of ceding a market like China that wants to buy their crop and could buy so much more of it. USW and NAWG called for World Trade Organization cases in 2016 intended to push China to meet its WTO commitments on domestic support and tariff rate quota management.

“We are happy that the Trump Administration supports and is pursuing those cases,” the groups’ joint statement said. “USW and NAWG know that farmers still want our organizations to keep fighting for fair opportunities to compete in China and other countries. They would prefer, however, to see our government do that first within the processes already in place.

“Instead, the administration is doubling down on a tactical policy that makes an already risky business of agriculture even more volatile. Policies like the ones being proposed will only make times harder for farmers, and the administration’s vague promises of protection for the farmers we represent offers little consolation.”

According to the U.S. Department of Agriculture, net cash wheat farm income is projected to be down more than 21 percent in 2018 compared with last year.

Jeff Karoub and Zeke Miller of The Associated Press contributed to this report. 

Larry Dreiling can be reached at 785-628-1117 or [email protected].