The Trump administration today announced plans to lift the 25% tariff on steel and the 10% duty on aluminum imports imposed last year on Canada and Mexico. Both countries subsequently retaliated against a host of U.S. products.
“We thank the administration for ending a trade dispute that has placed enormous financial strain on American pork producers,” said David Herring, a pork producer from Lillington, N.C., and president of the National Pork Producers Council. “Mexico’s 20% retaliatory tariff on U.S. pork has cost our producers $12 per animal, or $1.5 billion on an annualized, industry-wide basis. Removing the metal tariffs restores zero-tariff trade to U.S. pork’s largest export market and allows NPPC to focus more resources on working toward ratification of the U.S.-Mexico-Canada Agreement (USMCA), which preserves zero-tariff trade for U.S. pork in North America.”
Last year, Canada and Mexico took over 40% of the pork that was exported from the United States. NPPC has designated USMCA ratification as a “key vote” and will closely monitor support of the agreement among members of Congress. U.S. pork exports to Mexico and Canada support 16,000 U.S. jobs.
“We are also hopeful that the end of this dispute allows more focus on the quick completion of a trade deal with Japan,” Herring added. “U.S. pork is losing market in its largest value market to international competitors that have recently implemented new trade agreements with Japan.”
According to Dr. Dermot Hayes, an economist at Iowa State University, U.S. pork will see exports to Japan grow from $1.6 billion in 2018 to more than $2.2 billion over the next 15 years if the U.S. quickly gains access on par with international competitors. Hayes reports that U.S. pork shipments to Japan will drop to $349 million if a trade deal on these terms is not quickly reached with Japan.
Deere cut its profit and sales expectations for the year as a trade war between the U.S. and China escalates and farmers try to recover from a planting season besieged by heavy rains.
Prices of soybeans targeted by Chinese tariffs last year fell to a 10-year low this week as the countries traded jabs .
“Ongoing concerns about export-market access, near-term demand for commodities such as soybeans, and a delayed planting season in much of North America are causing farmers to become much more cautious about making major purchases,” Deere Chairman and CEO Samuel Allen said in a prepared statement Friday.
The warning from Deere pulled the entire S&P industrial sector down on fears that the nation’s largest manufacturers will see similar damage.
Deere now expects to earn about $3.3 billion in 2019, down from its forecast three months ago for profits of about $3.6 billion. The company is less optimistic about revenue as well, lowering its forecast of a 7% increase, to just 5%.
Company shares slumped 6% to a new low for the year.
China has targeted U.S. farmers , particularly soybean farmers, in retaliation for tariffs put in place by the Trump administration. The effects of China’s actions have not taken full force in the U.S. Farm Belt.
Roughly 60% of U.S. soybeans are shipped to China. But China doesn’t begin most of those purchases until the fall. It typically buys soybeans from South American nations such as Brazil and Argentina during spring and early summer.
Yet the fight being waged across the Pacific is already hitting U.S. farms.
Despite the $11 billion in relief payments that were doled out last year by the federal government, the personal income of farmers declined by $11.8 billion through the first three months of 2019, according to the U.S. Commerce Department. A similar pace of decline is expected in the coming months, according to the Federal Reserve Bank of Kansas City.
And that is hurting Deere.
Deere & Co. earned $1.13 billion, or $3.52 per share, for the period ended April 28, which is 6 cents less than industry analysts had expected, according to a survey by Zacks Investment Research. And it’s less than the $1.21 billion the Moline, Illinois, company earned during the same period last year.
Revenue rose to $11.34 billion from $10.72 billion. Adjusted revenue of $10.27 topped forecasts.
Construction and forestry sales climbed 11% to $2.99 billion on higher shipment volumes and increased prices. It also benefited from the inclusion of Wirtgen’s sales for two additional months. Equipment operations sales increased 5% to $10.27 billion, while agriculture and turf sales climbed 3% to $7.28 billion.
Trade officials from China are in Washington, DC this week as the Trump administration places further pressure on China to reach an agreement with the United States.
Trump will increase tariffs on China Friday, saying talks between the two nations are going too slowly. On Twitter, Trump states he will increase tariffs on $200 billion of goods from 10 to 25 percent. Trade organization Tariffs Hurt the Heartland says the move would cost nearly one million American jobs, and “increase the likelihood of retaliation on American farmers.” China and the U.S. meet this week in what was expected to be the final round of formal talks.
Trump is expected to host his Chinese counterpart Xi Jinping in June, with the expectation the two would sign an agreement. A spokesperson for China’s Foreign Ministry said Monday the negotiations held so far between the two sides have achieved positive progress, adding, China hopes the U.S. will work to “meet each other halfway and strive for a mutually beneficial agreement on the basis of mutual respect.”
Leaders of a major Iowa equipment manufacturer and Iowa farmers reiterated their calls Wednesday for President Donald Trump to remove tariffs against trading partners that have driven up the prices of steel and aluminum as well as retaliatory tariffs that are hurting farm exports.
Sen. Joni Ernst, R-Ia., told business leaders and farmers at a roundtable discussion that she needed to hear their experiences so she could get the message to Washington, D.C. that the U.S.-Mexico-Canada Agreement (USMCA) must be ratified and tariffs against Canada and Mexico must be lifted.
Roughly one-in-five jobs in Iowa is tied to trade, largely in agriculture. Wednesday’s event at Kinze Manufacturing in eastern Iowa was organized by the group Tariffs Hurt the Heartland and the Association of Equipment Manufacturers (AEM). Wednesday’s event was the 15th town hall around the Midwest as groups seek to rally support to drop tariffs.
Dennis Slater, president of AEM, said tariffs equate to a tax and the tax is hitting U.S. businesses and consumers. “China is not paying the tax. We are paying the tax,” Slater said.
Ernst said she did not see any serious sticking points that would prevent the USMCA from ratification. Congress right now is still waiting on the Trump administration to submit the trade deal to Congress, which then starts a timeline for votes on the trade agreement. The bill would begin in the House, where Ernst said she thinks House Speaker Nancy Pelosi, D-Calif., supports the USMCA.
“The administration needs to be working with the House on how to get this through,” she said.
Beyond the USMCA, there is equal angst about talks with China and the tariffs in place there. Last summer, President Trump imposed a 25% tariff on $50 billion worth of Chinese goods then followed up with a 10% tariff on $200 billion in goods. China has imposed tariffs on more than $110 billion in U.S. goods, including 25% tariffs on a range of agricultural products, including soybeans, and even higher tariffs on U.S. pork.
Ernst said trade needs to go beyond “one-off” sales to China for products such as soybeans and pork. “We need long-term resolution and that means getting the trade deal done,” the senator said.
Richard Dix, senior director of supply chain for Kinze, said the manufacturer has seen an unprecedented increase in the price of steel, which translates into higher prices for the planters, grain carts and tilling equipment Kinze makes. Then Kinze sees sales affected because farmers are worried about their own income going forward.
“If they are insecure, they are not in the dealership,” Dix said. “If they aren’t in the dealership, then they aren’t buying our products.”
Tariffs are having costs in a variety of ways. A study released this week by the University of Chicago and the Federal Reserve showed tariffs increased the costs for washers and dryers an average of $86 per washing machine and $92 per dryer. That added up to additional costs of $1.5 billion to consumers just for those products.
Further, tariffs and higher metal prices are taking away options such as investing more money in the company or rewarding employees, Dix said. “We’re forced to make different decisions because money is being siphoned away from our company.
“Our biggest fear is this becoming the new normal,” he added.
Other business people in eastern Iowa told of companies losing business to European or Asian firms because of the steel and aluminum tariffs, or the tariffs placed on China. Jon Kinzenbaw, who founded Kinze, said he’s concerned about what could happen to Iowa land values because of persistent low farm prices and the effect that would have on farmers.
“If we don’t get this thing turned around, I predict there will be a lot of farms and other things changing hands in the very near future,” Kinzenbaw said.
Ernst said she disagrees with the way President Trump used a national-security section of an old trade law, “Section 232,” to place steel and aluminum tariffs on most trade partners, especially Canada and Mexico. Those countries retaliated and expected the tariffs to be lifted once the USMCA was negotiated. Right now, the tariffs remain in place and the Trump administration has not offered any details about lifting the Section 232 tariffs.
“If there is a deal in place, and the USMCA is essentially done, then the tariffs need to be lifted,” Ernst said.
Ernst is working on legislation that would require the Department of Defense to determine national security threats before such tariffs could be imposed in the future.
Pam Johnson, former president of the National Corn Growers Association, said there is too much uncertainty about markets as farmers go to the fields this spring to plant a crop. She pointed to a recent University of Illinois analysis highlighting the losses farmers currently face planting either corn or soybeans.
“I have never had to go into a season planting a crop with that in mind,” Johnson said.
John Heisdorffer, former president of the American Soybean Association, told Ernst that U.S. farmers spent millions of dollars developing a trade relationship with China and he fears they may never get the market back like it was just over a year ago. Heisdorffer cited problems in the Dakotas trying to find a market for beans that would have been exported.
“All of those funds seem like they have been lost because we are back where we started,” Heisdorffer said. Heisdorffer also talked about how much U.S. trade disputes have helped international competitors such as Brazil. “We more or less handed them our soybean exports because of the tariffs.”
Ernst expressed confidence in the president on trade, especially the adoption of USMCA. “I think he is going to want to see this as a significant achievement of his administration,” she said.
Threatened tariffs could hike U.S. tomato prices between 40 and 85 percent. Research commissioned by the Fresh Produce Association of America suggests that if the U.S. withdraws from the Tomato Suspension Agreement on May 7, and applies duties on Mexican tomatoes, consumer prices could rise up to 40 percent in the period from May to December.
During other periods, such as winter, prices for certain varieties like vine-ripened tomatoes, tomatoes on the vine and Romas could rise more than 85 percent. At the request of tomato growers from Florida, U.S. Commerce Secretary Wilbur Ross announced the U.S. would end the current suspension agreement between the two countries.
By doing so, the U.S. would resume an anti-dumping investigation that could result in steep duties on Mexican tomatoes. The Tomato Suspension Agreement is an agreement suspending the antidumping investigation on fresh tomatoes from Mexico, which stops Mexico from dumping tomato exports on the U.S. market.