China retaliates with tariff hikes on $60 billion in U.S. goods; very bad news for farmers, especially soybean growers

Deutsche Bank Securities chart shows that peak soybean exports last year were half those of 2017.

The U.S. hiked tariffs on $200 billion in Chinese goods on Friday, saying that China had reneged on promises made earlier in negotiations. Today, China announced retaliatory tariffs on $60 billion in U.S. goods. "The Finance Ministry said Monday the new penalty duties of 5% to 25% on hundreds of U.S. products including batteries, spinach and coffee will take effect June 1," Joe McDonald reports for The Associated Press.

Though President Trump initially said Friday that the tariffs won't hurt American consumers, White House economic advisor Larry Kudlow said later that American and Chinese consumers and businesses will be affected. But of all Americans, Trump's voter base among agricultural interests has been hit hardest by the trade war.

"Of the top 10 states most affected by tariffs, all but two of them, Washington and Oregon, voted for Trump in the last election," Patti Domm reports for CNBC. The top 10 states hit hardest by tariffs as a percentage of state gross domestic product are, in order of most to least affected: Louisiana, Alaska, South Carolina, Alabama, Washington, Kentucky, Oregon, Mississippi, Michigan, and West Virginia. Louisiana is the nation's top exporter of soybeans.

Later on Friday, Trump said in a series of tweets that the government would try to ease farmers' pain by buying their crops: "We will buy agricultural products from our Great Farmers, in larger amounts than China ever did, and ship it to poor & starving countries in the form of humanitarian assistance." However, experts said that won't work, because the farm sectors most hurt by tariffs sell corn and soy meant for animal feed, oils, ethanol, and other products, Jessie Higgins reports for UPI.

"It's not as easy as people might think to buy a bunch of commodities and ship them somewhere," Todd Hubbs, a clinical assistant professor of agricultural commodity markets at the University of Illinois, told Higgins. "This is not sweet corn. People don't eat it. It's high in starch and low in sugars and it doesn't taste good."

Many corn and soy farmers were already stuck with unsold crops from last year, and some stockpiles were ruined in recent flooding. Since China was our biggest soy customer and other trading partners haven't made up the deficit, experts predict farmers won't be able to sell their beans again this year. 

"The demand from rest of the world combined is not as much as the Chinese market," Grant Kimberley, marketing development director for the Iowa Soybean Association, told Higgins. "It means we're going to have significantly more soybeans in storage again this year."

Some farmers say it's hard to feel optimistic about this year's harvest, Donnelle Eller reports for the Des Moines Register. Brent Renner, a 43-year-old soybean farmer from near Clear Lake, told her: "A lot of us think it can't get any worse, that it can only go up from here. But that's probably not a safe bet."