Kevin Scott, a fourth-generation North Dakotan soybean farmer, figured that 2018 would be a year of hard-won profits for American growers of the feed grain. Competition for growers has been increasing. Particularly as Brazilian farmers, turn their proximity to the sun into a more valuable, higher-protein product. But growing Chinese demand for soybean imports has been a brightspot.
Now, that outlook seems more dubious: the Chinese government is threatening a new 25% tariff on American soybeans, along with more than 100 other products, in retaliation for President Trump’s threatened duties as punishment for Chinese IP theft, and Scott worries he’ll have to fight with one hand tied behind his back.
“The threat of tariffs causes a lot of tension,” Scott says. The price of soy plummeted initially after China raised the possibility of new duties, but has since recovered. Nevertheless, the looming threat makes it difficult to plan next year’s crop, and if China follows through, the effect could be severe. A recent study by Purdue University economists estimate that a 25% tariff would cause a 37% decline in US soybean exports.
Small farmers aren’t the only ones threatened. Fortune 500 firms like agricultural equipment manufacturer John Deere have seen their stock prices take a hit, as skittish investors worry that coming tarris will clip profits, and U.S. whiskey, aircraft, and other products have also been targeted. History does not bode well for trade wars’ victims, either. Scott, who has farmed for 37 years, worriedly recalls Jimmy Carter’s 1980 embargo of US grain to the Soviet Union, which contributed to a decade of economic struggle for farm country.
The president has proposed using existing crop insurance programs to bail out the ag industry, but Scott would prefer Xi and Trump can agree to peace terms instead. “Farmers prefer to make their living from the market,” he says. “The only programs that we are interested in are those that help us export at a decent price.”