The escalating tensions are not over yet. The Trump administration is preparing to hit another $16 billion worth of Chinese exports with additional duties once it completes a public comment period. | Getty Trump country hit hard by Chinese tariffs

China’s retaliatory tariffs on $34 billion worth of U.S. goods are directly aimed at rural regions of the country that voted heavily for President Donald Trump.

The Chinese penalties are a response to tariffs on more than 800 Chinese products like medical devices and auto parts that took effect at midnight Friday in the U.S. The move and countermoves are the most severe trade actions so far, and likely to cut deep into the incomes of farmers, ranchers and agribusinesses.


Beijing is firing back with a 25 percent tariff on imports of 545 American items — many of them agricultural products such as soybeans, cotton, rice, sorghum, beef, pork, dairy, nuts and produce.

The brunt of the penalties are likely to affect U.S. soybean growers. Nearly one-third of U.S. soybeans, or about $14 billion, is sent to China each year, where the commodity is primarily used to feed China’s enormous pork industry.

Now that the commodity is about to become significantly more expensive, Brazil and other alternative soybean growers will be the beneficiaries of the escalating tensions.

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“At the end of the day, these tariffs will increase prices for U.S. soybeans in China, and incentivize production in South America,” said Brent Gloy, an agricultural economist at Purdue University who also operates a farm in southwest Nebraska.

The latest actions will be on top of the tariffs on about $3 billion in U.S. goods — including fruit, nuts, pork and wine — that China imposed in response to Trump’s decision to place tariffs on imports of steel and aluminum using national security justifications.

Friday’s actions stem from a separate investigation by the Office of the U.S. Trade Representative that fault China for the loss of U.S. valuable intellectual property, either through forced technology transfers or outright theft.

Gloy told POLITICO that much of the damage to commodity prices has already been done because of the uncertainty surrounding whether the Trump administration will follow through with each new round of tariffs. Already, China has been looking to Brazil for long-term relationships.

“The markets have really dropped. We don’t know what will happen for months or maybe even years, and that is a big deal,” Gloy said. He added that expected profitability for soybeans has fallen by nearly $100 an acre in the past few months.

“[Farmers] can forward contract or guard against downward prices by selling on the options market, but at the end of the day, farming is a risky business, and the long-term damage we’re doing to all of these trading relationships is not to be forgotten,” he added.

Ken Morrison, who spent more than 25 years as an agricultural commodities trader and provides market insights through his service “Morrison On The Markets,” said he isn’t concerned about the political implications of the tensions because economic necessity will ultimately drive purchasing decisions.

Morrison noted that China could avoid buying U.S. soybeans at least through October, which is somewhat typical for seasonal reasons. But by then, supplies from Brazil will no longer be readily available.

China will have to purchase at least some portion of its soybeans from the U.S. However, it will likely cut back on its purchases by several million bushels, Morrison predicted. And while other countries could flock to the U.S. market to take advantage of lower soybean prices, they won’t be able to offset U.S. losses from the Chinese market, which consumes 65 percent of the soybeans traded worldwide.

Meanwhile, other U.S. agricultural sectors like pork and fruit are about to be hit with a second wave of retaliatory tariffs by China. All the various duties on U.S. pork cumulatively add up to 71 percent in tariffs, according to Rabobank, and could effectively shut it out of China’s market.

The retaliatory measures come at a time when American farmers are ramping up hog production to meet demand from a growing middle class in Asian nations. China is the No. 2 export destination for U.S. pork, which shipped about $1.1 billion worth of product last year.

Specialty crops growers also may be dealt a difficult blow. China is the largest customer for cherry producers in the Pacific Northwest, purchasing $130 million worth last year, according to Mark Powers, president of the Northwest Horticultural Council.

Before Trump started a trade dispute, China had a 10 percent tariff on U.S. cherries. That increased to 25 percent after China retaliated against the Trump administration’s steel and aluminum duties, and will increase to 50 percent on Friday.

“The cherry season is so rapid and compact, that it is difficult to put a number on the impact,” Powers said. “The current picture is very uncertain, but a cumulative 50 percent tariff will impact returns to growers. Right now, the sense I’m getting is we will still ship, but the tariffs will certainly impact pricing."

Powers also said that more than 50 percent of the volume of apple exports from Oregon, Washington and Idaho are subject to retaliatory tariffs, with Mexico, India and China all responding to Trump’s trade actions.

U.S. farm groups, including the American Farm Bureau Federation, American Soybean Association, National Corn Growers Association and National Pork Producers Council, have been pleading with the Trump administration to adopt a different strategy of holding trading partners accountable. They argue farmers and ranchers are already dealing with a four-year slump in commodity prices, and U.S. officials should instead be focusing on opening new markets to help boost their bottom lines.

Instead, the Trump administration has forged ahead, and requested that Agriculture Secretary Sonny Perdue devise a plan to make up for U.S. producers’ lost profits and ensure the agriculture industry doesn’t bear the brunt of retaliation alone in Trump’s quest to balance the $500 billion U.S. trade deficit.

Perdue during a tour through Washington state last month said he will decide by Labor Day whether USDA will send financial aid to farmers and ranchers.

Perdue has told Congress that USDA economists tracking the market can differentiate between normal market fluctuations and the impact of trade retaliation, but Morrison told POLITICO he remains “dubious” about whether the department will be able to deploy such a plan.

“I have no doubt that trade concerns have contributed to lower crop prices, but I’m also convinced that better than normal growing conditions have also contributed,” Morrison said. “How does the USDA divvy up what is attributed to trade and what is attributed to the fundamentals of supply and demand? That is a basic challenge."

The escalating tensions are also not over yet. The Trump administration is preparing to hit another $16 billion worth of Chinese exports with additional duties once it completes a public comment period. That could be as early as August. China has said it would retaliate in kind.