The purpose behind the tariffs imposed by the Trump administration is to protect American jobs while balancing out the trade deficit. Another basis of some of the tariffs targeted at China is to pressure China to discontinue its practice of stealing intellectual property from U.S. businesses.
How much impact will these tariffs have on the U.S. economy? It is anyone’s guess. The tariffs only impact about 0.1-0.2% of GDP, which leads some to conclude that the overall impact will be negligible. Other analysts call recent events an escalating trade war and fear a 4% loss of global GDP that could increase if the countries continue adding on more tariffs.
However, there is no question that the tariffs will affect individual markets. Agriculture is one of those areas that is impacted. Soybean prices have already dropped due to tariffs imposed by other countries. It remains to be seen if new trading partners can be found to counter the impact of the tariffs on various agricultural commodities.
Tariffs Imposed on U.S. Agriculture By China
U.S. produce has been affected by separate impositions of tariffs by China in the past few months. The first round of tariffs was imposed on April 2nd. This list included fruits, nuts, and pork. Click for complete list. The fruits and nuts will have a 15% duty applied while pork, ginseng, and aluminum scrap will receive a 25% tax.
Sorghum was the next target for China on April 17th. China imposed an importers fee of 179% on sorghum. Sorghum is a significant import to China from the U.S. It is used for feed livestock and to make a popular Chinese liquor. U.S. sorghum exports received another hit on July 6th when it was among the items to have a 25% tax imposed.
The July 6th imposition of a 25% tariff on $34 Billion worth of U.S. exports to China was specifically aimed at agriculture. These tariffs were in retaliation to the tariffs imposed by the U.S. on $34 Billion of Chinese exports. Here are the crops affected by this 25% tariff:
- Yellow Soybean
- Black Soybean
- Corn
- Corn Flour
- Uncombed Cotton
- Cotton Linters
- Sorghum
- Other Wheat and Mixed Wheat
- Dried Cranberries
According to BBC research, the American agriculture sector will have the most products affected by the tariffs compared to other U.S. sectors.
Tariffs Imposed By Other Countries
When the U.S. imposed a tariff on imported steel and aluminum, the tariff applied to all countries, not just China. While there was a delay in the application of the tariff for some U.S. ally countries, the tariff eventually was applied to all countries. No country enjoys a tariff placed on its goods; so several countries imposed retaliatory tariffs on U.S. goods.
Mexico imposed tariffs on $3 Billion of U.S. exports. Some of the agricultural products affected by the 15-25% taxes include pork, apples, and potatoes. This tax will particularly affect the pork industry, because Mexico is the largest market for U.S. pork exports.
The European Union (EU) imposed additional 25% tariffs on U.S. exports including agricultural based products of non-prepared rice, sweet corn, kidney beans, cranberry juice, and orange juice. U.S. President Donald Trump threatened to impose a 20% import tax on all European cars, which received a counter threat from the EU of a similar tax on U.S. cars coming to Europe.
Canada imposed tariffs on U.S. exports worth $16.6 Billion in the beginning of July. Agricultural products affected by these 25% tariffs include cucumbers and maple syrup.
Turkey started the imposition of tariffs on June 21st. Agricultural products affected include almonds, walnuts, and rice.
Japan, Russia, and India are other countries threatening retaliatory tariffs against the U.S. All countries have informed the World Trade Organization of their objections to the U.S.’s claim that the steel and aluminum tariffs are warranted by national security concerns.
It All Started With Steel
The current trade war all started with the main component of Heartland Tank Companies’ above ground storage tanks, steel. The Trump administration imposed a tariff on steel and aluminum in March, stating that the tariff was for the purpose of national security. The tariff on steel is 25% while only 10% on aluminum.
As expected, the price of steel in the U.S. has risen. At Heartland Tank Companies, we have seen an $18 increase in U.S. steel per hundred weight since March. With the other countries retaliating with steel and aluminum tariffs, steel prices are likely to stay at these elevated levels in the near future.
Despite the increase in steel prices, Heartland has yet to see a slowdown in our above ground tank fabrication and construction sector. Customers seem confident in their ability to move the product to be stored in their new fertilizer tanks.
For more information on Heartland Tank Companies’ above ground storage tanks and liners Click Here.
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Need some clarification on what has happened with international tariffs so far? CNN Money provides a detailed timeline of the beginning and continuation of the imposition of tariffs between the U.S. and other countries: Click Here. This helps provide prospective of actual events among the blips of news coverage.