In another heavy blow to U.S. farmers, China is telling its state-owned businesses to stop buying crops from America.
China’s move is in retaliation for President Donald Trump’s announcement last week that he intends to place a new round of punishing trade taxes on $300 billion worth of imports from China as attempts to avoid new tariffs failed.
The news roiled global markets. Wall Street did a freefall, dropping nearly 1,000 points Monday.
The drama unfolded after trade discussions between the superpowers went sour July 31. China rejected U.S. demands to purchase more American goods. Trump reacted by announcing new tariffs. Now, China is boycotting U.S. crops.
Farmers want trade, not aid
American Farm Bureau Federation President Zippy Duvall called the latest developments “a body blow to thousands of farmers and ranchers who are already struggling to get by.”
In Arizona, cotton, beef and tree nuts would be most impacted if Chinese markets disappear, said the director of government relations for the Arizona Farm Bureau, Chelsea McGuire.
“We don’t have a lot of specific information yet, but we definitely anticipate significant impacts to Arizona agriculture,” McGuire said Tuesday. “Already, ag exports to China have fallen more than 50 percent, compared to steady growth in Chinese ag exports between 2000 and 2017.”
To provide relief to farmers this year, President Trump approved $16 billion in aid.
Farmers are grateful, McGuire said, but would “much rather have trade than aid.”
Arizona cotton would be hardest hit, she said. Arizona exports 70 percent of its cotton. Twenty percent goes to China.
Local and state communities would feel it as well. The cotton industry generates $400 to $500 million for the annual economy and provides 3,000 jobs, according to the Arizona Department of Agriculture.
“If, in the end, these tactics open additional trade opportunities with China, we will be thrilled,” McGuire said. “But in the meantime, like with any industry impacted by the trade wars, China’s finding other partners to make up for the lack of American ag products. Those markets will be difficult to recover when and if our trade relationships are mended.”
China responds with fighting words
Trump tweeted that the new tariffs will begin September 1 if China does not agree to buy more U.S. crops.
“Trade talks are continuing, and during the talks the U.S. will start, on September 1st, putting a small additional tariff of 10 percent on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already tariffed at 25 percent.”
In response, China’s new ambassador to the United Nations, Zhang Jun, told Reuters:
“China’s position is very clear that if U.S. wishes to talk, then we will talk. If they want to fight, then we will fight.”
China on Monday told state-owned companies to stop purchasing American crops. Beijing also let the Chinese yuan sink to the weakest level in over a decade. That will make Chinese goods less expensive for other overseas buyers as China is forced to find new markets.
Threat to economy, consumer wallet
If Trump imposes new tariffs, U.S. consumers will feel it more this time around, economists and trade experts agree. More consumer products are targeted in the next round – – smartphones, video games, televisions, appliances, furniture, clothing, footwear, toys.
According to a study commissioned by the Consumer Technology Association, U.S. consumers can expect to pay between $50 to $120 more for cell phones, laptops, tablets and video game consoles if tariff tensions continue to escalate.
A Trade Partnership report prepared for the National Retail Federation estimates the impacts of current and proposed tariffs on Chinese goods could cost consumers $4.4 billion more for apparel, $2.5 billion more for footwear, $3.7 billion more for toys, and $1.6 billion more for household appliances.
More than one in four Fortune 500 companies stressed out
Industry leaders have repeatedly called on Washington to find other ways to negotiate a deal besides tariffs on U.S. importers.
A recent analysis by the U.S. Chamber of Commerce shows that since January, more than a quarter of Fortune 500 companies have mentioned the impact of tariffs on earnings calls.
The data adds to mounting empirical evidence that tariffs pose a growing concern for American businesses and present a major threat to the U.S. economy, the Chamber said in a prepared statement.
“Fortune 500 companies produce two-thirds of the U.S. GDP with $13.7 trillion in revenue and 28.7 million employees, meaning that the U.S.’s largest businesses are expressing concern at recently imposed or proposed tariffs with our country’s biggest trading partners,” the Chamber said.
No one winning the trade war
According to the U.S. Department of Commerce, both countries are suffering financially from the tariff battles. American exports to China fell 18.9 percent in the first six months of 2019 to $52 billion. China’s goods to the U.S. have dropped 12.4 percent to $219 billion.
“In the end, tariffs are a tax on imported goods, and they are paid by American families and businesses. And tariffs are known to do two things: block imports or increase their true costs. If the earnings calls are any guide, these increased costs from tariffs will almost certainly result in Americans paying more at the checkout stand for a wide range of items,” the U.S. Chamber said.