|09 August, 2019

Trump turns U.S. farmers into trade-war fertilizer

America’s farmers are suffering from more lost sales, rotting produce and bankruptcies

Farming equipment is seen on Foster Farm in Sagaponack, on New York's Long Island, U.S., July 8, 2019.

Farming equipment is seen on Foster Farm in Sagaponack, on New York's Long Island, U.S., July 8, 2019.

Reuters/Lindsay Morris

SAN FRANCISCO - Donald Trump is turning U.S. farmers into trade-war fertilizer. The president is using China’s stance on American agricultural products to escalate the economic conflict – most recently by banning companies from doing business with Huawei Technologies. Beijing is willing to egg him on. There are domestic political reasons for the White House to make just $20 billion of goods the crux of the battle. But it increases farmers’ suffering.

The roots of the latest tit-for-tat strikes lie in the meeting between Trump and his counterpart Xi Jinping at the G20 summit in June. The U.S. leader proclaimed that Beijing pledged to buy more farm goods, having reduced its intake at the start of the trade battle. China has yet to follow through – though had never publicly detailed specifics.

So last week an angry Trump threatened to impose a 10% levy on $300 billion-worth of goods from the People’s Republic, starting in September. His economic adviser, Larry Kudlow, made the link clear, suggesting China could avoid the additional tariffs if it bought significantly more agricultural products.

There’s logic to the White House putting so much emphasis on a sector that in total accounts for just 1% of GDP. Farmers live in states that usually vote Republican and that Trump needs to win if he is to be re-elected next year. China’s stance, especially after this year’s floods that devastated much of the U.S. Midwest’s arable land, puts that in danger. Trump has been tweeting more about farmers than other China trade concerns like intellectual property theft.

Beijing should be willing to cooperate. Agricultural output accounted for almost a fifth of China’s U.S. imports during the Obama administration. So the costs of both tariffs and finding replacement goods elsewhere are taking their own toll.

But instead of caving to Trump’s threats like other countries, Beijing is betting it can win by playing hardball. That may be by getting the White House to surrender before the 2020 election, or by negotiating with a new president if Trump loses - in part perhaps a consequence of China’s stance. That would explain why its Commerce Ministry on Tuesday said Chinese companies have stopped buying U.S. agricultural products entirely.

Both sides’ tactics, though, come at a cost. America’s farmers are suffering from more lost sales, rotting produce and bankruptcies. The next thing to go may be their political allegiance.

CONTEXT NEWS

- U.S. President Donald Trump said on Aug. 9 that America would not do business with Chinese telecommunications firm Huawei Technologies, though stressed that could change if there is a trade deal with China. Companies now need export licenses from the U.S. Commerce Department to sell American products to Huawei after it was placed on the federal agency’s so-called entity list – a catalog of foreign firms that U.S. companies need special government permission to sell goods to.

- Trump made his comments after China’s Commerce Ministry said on Aug. 6 that Chinese companies have stopped buying U.S. agricultural goods. Beijing is also considering imposing additional tariffs on such products after Trump threatened to impose a 10% levy on $300 billion in Chinese goods on Sept. 1.

- The move would mean that all Chinese imports would face taxes. White House economic adviser Larry Kudlow suggested on Bloomberg television on Aug. 2 that China could avoid the additional tariffs if it bought more agricultural products in significant quantities.

(Editing by Antony Currie and Amanda Gomez)

© Reuters News 2019

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