How the China Tariffs are Affecting U.S. Agriculture

May 15th, 2019 | Posted by Drip-Well

The recent trade talks between U.S. President Donald Trump and China have been all over the news—namely their failure to reach an agreement. The combination of these recent developments and the already declining agricultural economy have farmers and ranchers worried about the future of their businesses and livelihoods.

It’s important to be aware, as both an agriculturalist and an American citizen in general, of the effects that the newly imposed trade tariffs on Chinese goods will have on the farming economy and the country’s economic standing as a whole. To give you an idea of what’s at stake, U.S. goods and services trade with China totaled an estimated $737.1 billion in 2018—with exports at $179.3 billion and imports at $557.9 billion. The U.S. goods and services trade deficit with China was $378.6 billion in 2018.   

As a leading manufacturer of American-made essential agricultural and irrigation equipment, we want to ensure you understand the impact of the changes in U.S. international trade policies. Comprehensive insight into the agricultural economy and its reaction to trade tariffs is imperative for guaranteeing that you make the most out of your business investments and profits!

How the China Tariffs are Affecting U.S. Agriculture

What are tariffs?

A tariff is a tax on goods imported from a foreign country. They’re usually determined as a percentage of the overall transaction price the buyer is paying.

For example, if you need to order a tractor part from another country whose imports carry a tariff rate of 10%, then a $100 commodity now costs you $110.

Tariffs can be levied on both products and services.

Why do countries impose tariffs?

At one point the primary purpose of tariffs was to generate government revenue—before the income tax was instituted tariffs produced about 90% of federal revenue.

In the last century they have become more of a punitive measure used to raise the price of imports and discourage domestic businesses from buying from countries with unfair trading policies. They are also a measure of protection against foreign competition in many different industries.

What are the new tariffs being enforced by President Trump?

The recent increase in trade tariffs is an attempt to make up for the large gap in U.S. international trade, specifically with China, that we mentioned earlier. Trump and his administration are trying to punish Beijing for its predatory business tactics on behalf of Chinese companies.

The President began gradually imposing tariffs on Chinese imports in the summer of 2018, and recently hiked the tariff rate up from 10% to 25% on about $200 billion worth of Chinese goods.

How will U.S. Agriculture be impacted by the China tariffs?

In 2017, more than 25% of the $140 billion in American exports to international markets were farm and ranch products. China is the second largest export market for the agriculture industry.

Trump’s tariffs have provoked top trading partners, like China, to impose retaliatory tariffs on American imports—having a deeply negative impact on farmers and ranchers who depend on exports to support their businesses. Soybean producers, for example, send almost 60% of their crop to China alone. When asked how long farmers will support the president with the tariffs, the response was, “we will support him until we don’t.”

Tariffs trickle down from international trade through large businesses and eventually to the consumer with an increase in product and labor prices. Large manufacturers are forced to raise their product prices to make up for the increased tariffs costs, and small business owners like farmers and ranchers are forced to contend with more expensive equipment.

At the same time the cost of production is going up, these agriculturalists are experiencing a decrease in foreign market sales. The effects of tariffs on the farming industry bleed into the overall U.S. economy and put all businesses at risk for a significant loss in profits as consumers are faced with higher product prices.

It’s crucial to be prepared for each growing and harvesting season with the most efficient and cost-effective products in any economy. That’s why L&M Manufacturing offers equipment to meet your business needs in any situation. For more information on the essential, top-quality products we carry, please feel free to contact us today or visit our website!