China's pork, ethanol tariffs will hit rural Iowa pocketbooks

Worries over a looming trade war have already hit Iowa pork producers' pocketbook to the tune of $240 million from falling prices, and the damage will likely grow, industry leaders say.

On Friday, China said it would impose tariffs on $3 billion worth of American-produced fruit, pork, wine, seamless steel pipes and more than 100 other goods.

A 25 percent tariff on pork was unwelcome news in Iowa, the nation's largest pork producer.

"It could really put a hurt on us," said Trent Thiele, an independent pork producer in northeast Iowa.

Mexico, Hong Kong and China, Japan and Canada are the nation's top export markets for U.S. pork.

The Chinese market alone purchased about $1.1 billion in U.S. pork last year, according to the U.S. Meat Export Federation.

U.S. pork prices have already dropped about $6 per market-weight pig over the last couple of days as threats have grown.

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President Donald Trump announced his plan this week to impose tariffs on $60 billion worth of Chinese technology and telecommunication products. He had previously proposed tariffs on steel and aluminum that could hurt China.

"That’s a lot of money that’s not coming back to rural Iowa," said Thiele, an Iowa Pork Producers Association board member.

With the tariffs making U.S. pork less competitive, it would likely to push producers in Iowa and elsewhere to reduce their herds.

"The pork industry will have to downsize modestly," said Dermot Hayes, an Iowa State University economist.

Hayes hoped that Iowa pork producers have locked in higher prices before the tariff threats sent prices tumbling.

That option is unlikely to help producers next year, if the tariffs are imposed. "We're on a dangerous path," he said.

Ethanol producers, too, are on the Chinese tariff hit list.

The country proposes increasing an existing 30 percent tariff on the fuel by an additional 15 percent.

Iowa leads the nation in ethanol production, shipping out a record 4.2 billion gallons of the renewable fuel last year.

About half of Iowa's corn production is used to make ethanol and dry distillers grain, a feed for livestock.

“China’s response was entirely predictable, given recent actions by our administration to implement new tariffs. It is my fervent hope that the White House now fully understands the impact these actions will have on America’s ethanol industry and farmers," said Bob Dinneen, CEO of the Renewable Fuels Association.

Monte Shaw, executive director of the Iowa Renewable Fuels Association, said an added tariff would squeeze Iowa ethanol producers.

"Plants will have to dial the knob back on production," Shaw said. "If there's less production, there's less corn that's ground, and more pressure on corn prices that are low to begin with."

China, he said, is a large and potentially fast-growing market for U.S. ethanol exports.

"We just need to communicate to both U.S. and Chinese officials the serious impact of these planned moves," Shaw said.

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China was the third-largest market for U.S. ethanol exports in 2016, accounting for almost 20 percent of total exports, according to the Renewable Fuels Association.

So far, China has avoided adding a tariff on U.S. soybeans, which would be a tremendous blow for Iowa growers.

Iowa was the nation's second-largest soybean producer last year.

"The Chinese customers are hopeful, as we are, that the dispute between the United States and China does not lead to an all-out trade war," said Kirk Leeds, CEO of the Iowa Soybean Association, who is part of an Iowa delegation currently visiting China.

China, with a population of more than 1.4 billion, imports about 60 percent of global soybean production.

About 40 percent of China’s soybean imports come from the U.S. and are valued at $14 billion, the Iowa Soybean Association said.

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