The US agriculture industry, often the first to feel the hit of trade disputes, is bracing itself as nations threaten to retaliate

A farm in Arizona. US agricultural exports are worth about $140bn a year.

A farmer in Arizona.  US agricultural exports are worth about $140 Billion a year. Photograph: Zuma/Rex/Shutterstoc.   

America’s farmers are about to start harvesting the wheat crop. Close to 60m tonnes are gathered annually and almost half is usually exported. Where this crop will be sold, though, remains an open question.

As Donald Trump’s trade war escalates, a lot of farmers are worried. Trump was elected, in part, on a promise to put America’s interests first and crack down on what he characterizes as a world trade system rigged against the US.  But until recently the president has acted like many of his predecessors – talking tough on the campaign trail but backtracking in the White House.

As the harvesting season begins, China, Mexico, Canada and the EU are all threatening retaliation over Trump’s tariffs on steel and aluminium. Agriculture is in the firing line.

“Farmers are often the first to feel the hit in trade disputes that may not involve their own products”, said Salmonsen. This time, the scale of the dispute could hardly be worse: US agricultural exports are worth about $140bn a year. Canada and Mexico import about $39bn worth, China’s share is $20bn and the EU around $12bn. All those countries have threatened retaliation over metal tariffs.

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The dispute looks set to escalate. On or around 15 June, Trump will publish a list of $50bn worth of Chinese technology products to be hit with a 25% tariff. China is expected to hit back with a list of its own and US farmers expect they will be top of that list.

Negotiations over the North American Free Trade Agreement (Nafta) have turned toxic as Canada and Mexico decide how to retaliate. Nafta has been great for US agriculture: exports were just $8.9bn in 1993 before the agreement. “All we can say is, we hope this gets solved sooner rather than later,” said Salmonsen.

The problem is that no one, perhaps not even Trump, seems to know what will happen next. Days after the US treasury secretary, Steven Mnuchin, said a trade war with China was “on hold”, the senior trade adviser Peter Navarro dismissed that comment as an “unfortunate soundbite”.

Senior Republicans including the House speaker, Paul Ryan, have called for Trump to rein in his rhetoric. Conservative economists are disappointed. “It is just increasing tensions,” said Jacqueline Varas, the director of immigration and trade policy at the conservative American Action Forum. “Uncertainty is a huge factor.”

China is expected to hit back at Trump’s tariffs with tariffs of their own against US agriculture.

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 China is expected to hit back at Trump’s tariffs with tariffs with tariffs of their own against US agriculture.  Photograph:  Rex/Shutterstockn
The situation is little better in reliably Republican Kentucky, the state with the second-greatest exposure to a trade war after Michigan, according to a report from Moody’s. Kentucky is not just another car manufacturing state: its bourbon industry is also facing international retaliation. According to the Kentucky Distillers’ Association, whiskey is worth $8.5 Billion to the state and supports 17,500 jobs.

 

It’s not just farmers bracing for icy trade winds. Bourbon, alongside Harley-Davidson and Levi’s jeans, is on an EU list of potential targets for tariffs. The targeting is clearly political: it can hardly be a coincidence that Harley-Davidson, for example, is headquartered in Wisconsin: another state where Republicans have a slim majority and face a tough battle in November’s midterm elections.

“FAIR TRADE!” Trump tweeted last week. “Canada has treated our Agricultural business and Farmers very poorly for a very long period of time. Highly restrictive on Trade!”

“A lot of the talk so far has been about what might happen,” said Salmonsen. Now that matters are coming to a head: “June looks critical.

 

By Stephanie Mercier

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