By Tom Sleight, President and CEO, U.S. Grains Council
Tariff announcements volleyed across the Pacific this week between the United States and China, shaking markets and showing the importance of trade policy to pocketbooks in rural America.
Early in the week, China announced its response to steel and aluminum tariffs issued last month by the United States – an additional 15 or 25 percent, effective immediately, on an array of goods worth a total of $3 billion, including U.S. ethanol (at 15 percent) and U.S. pork (at 25 percent).
On Tuesday, the United States announced a new set of tariffs on Chinese products only, totaling approximately $50 billion. That action would levy 25 percent, mostly on tehnology products, and go into effect at some point after a comment period that ends in May. China reacted quickly with its counter – 106 categories of imported items facing 25 percent tariffs when the new U.S. policy is in place, including sorghum, corn, distiller’s dried grains with solubles (DDGS), beef and soybeans.
While addressing trade disputes that largely have to do with manufacturing and high technology, the announcements have had a direct impact on feed grains in all forms – including corn, sorghum, DDGS, ethanol, pork and beef exports – and the health of the broader U.S. ag economy, including soybean demand.
Few trade policy watchers were surprised to see the escalation, and the latest and most damaging tariffs are not yet in effect while the two governments continue talks to find compromises. Yet commodity markets were unsettled, and farmers are concerned as they head into the fields for the new crop year.
Unfortunately, we at the U.S. Grains Council have operated in this tense trade environment for several years, facing policy challenges from China on most of the products we promote including corn, DDGS, ethanol and sorghum. We have engaged with our members and industry leaders on all of these issues, fighting back with international law and processes outlined through the World Trade Organization’s (WTO’s) rules.
Meanwhile, we have activated our global staff to undertake new marketing efforts to find demand from a more diverse group of customers. These efforts pay off, as we saw with DDGS sales last year, and despite the challenges our industry has faced over the last year, we see hope for short-term and long-term demand from many markets including in Southeast Asia, North Africa, the Western Hemisphere and with traditionally favorable trading partners like Mexico, Japan, South Korea, Taiwan and Colombia.
Watching the news this week, anyone could think trade policy always moves this quickly. In truth, our members have been working to build markets for nearly 60 years, steadied by the belief that hard-won progress in trade is vital to the prosperity of the world’s economy and to our individual members, farmers and exporters.
Despite the challenges we face at the moment, never has this been more true: 95 percent of the world’s consumers now live outside of the United States, increasing prosperity and population growth mean more demand for the products we are selling, and the United States remains the most innovative and robust agricultural producer in the world. Agricultural exports contribute positively to our trade balance year in and year out, and they support millions of manufacturing, transportation and retail jobs in the United States while offering more and better food to people in the more than 75 countries that buy our coarse grains and co-products each year.
In the coming days, we will continue our constant engagement with our own government, our customers in countries like China and our members who are working to manage their businesses despite new uncertainty. We will keep an eye on mitigating concerns in the short term and building trust and support over the long term in partnership with all of them. I never get tired of repeating: when trade works, the world wins.
About the U.S. Grains Council
The U.S. Grains Council develops export markets for U.S. barley, corn, sorghum and related products including distiller’s dried grains with solubles (DDGS) and ethanol. With full-time presence in 13 key markets and representatives in an additional 15 locations, the Council operates programs in more than 50 countries and the European Union. The Council believes exports are vital to global economic development and to U.S. agriculture’s profitability. Detailed information about the Council and its programs is online at www.grains.org.