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HARRISONBURG — Summit after summit, American and Chinese government trade representatives have failed to agree on changes to the trade conditions between two of the largest economies in the world over the past several years.

The conflict between the nations over trade has created tough situations for some Shenandoah Valley producers and logistics firms, but opportunities for others.

On May 10, President Donald Trump announced an increase on the tariff, or import tax, on some goods from China from 10% of the items value to 25%.

In response, the Chinese government of president Xi Jinping announced retaliatory tariffs on Monday for over 5,000 American exports headed to the Asian economic powerhouse.

Supporters of the tariffs claim it will encourage businesses to move back to America, where many prices for production are higher due to higher wages in the U.S. and more rigid health and environmental regulations.

Trade wars, such as the mutual tariffs between the U.S. and China, bring instability to agriculture markets and changes to the markets may take years to correct, said Lareth May, president of the Rockingham Farm Bureau.

“Farm producers need a sure and stable export market for their agriculture products,” he said. “Right now everything seems to change about as fast as Trump can tweet something.”

Pork and soybean products may take a hit early on, he said. And farmers may switch from planting soybeans to corn since the market has gone down in soybeans.

This rush to change crop could result in an oversupply and then crash of prices, or an undersupply and an increase in prices, May said.

In fact, between 2007 and 2017, China bought approximately 30% of the annual American soybean crop, said Robert Harper, a grain merchandiser for the Virginia Farm Bureau Federation.

And since trade conflict has begun, China has been purchasing those beans from South American countries such as Brazil, Paraguay, Uruguay and Argentina, he said.

“It looks like, to me, South America has been the real winner between the battle between us and China on how we tax each other’s imports,” Harper said.

The government has developed programs to compensate farmers for their loss, such as the Market Facilitation Program. The MFP has given soybean farmers $1.65 for every bushel, Harper said.

Though some are worried about the instability the tariffs and trade war bring, others see it as an opportunity.

The poultry industry has not shipped a considerable amount to China since the country banned poultry imports from the U..S in 2015 following the Avian influenza outbreak, said Hobey Bauhan, president of the Virginia Poultry Federation.

“Therefore, the poultry industry’s issue with China is not tariffs, which do not apply to poultry,” he said. “Our concern is this non-tariff trade barrier.”

The export market is an important sector for American growers, Bauhan said. American poultry growers export 16% of chickens and 10% of turkeys grown in the states to other countries, despite the lack of access to Chinese markets.

The largest importer of American poultry is Mexico, who is a participant in trade deals such as the North American Free Trade Agreement, and its Trump-era replacement, the U.S.-Mexico-Canada Agreement, both of which are good for the American poultry, Bauhan said.

The negotiations between the United States and China could reach a point where the Chinese government would repel its stance against American-grown poultry, he said.

“We’re hopeful,” Bauhan said.

Importers of Chinese goods will also be affected by the tariffs between the countries, along with exporters of American goods.

Classic Distribution in Mount Crawford, moves cabinets made in China. The business is a sister-company with InterChange, the Mount Crawford based logistics firm.

Prices will have to rise to deal with the effect of the tariffs, said Chris Thompson, vice president of business development for InterChange.

“We’re having to raise prices to have to account for the additional cost of the tariffs and we are anticipating that supply chains are going to have to change,” he said.

However, InterChange itself is not anticipating any significant turbulence from the trade war, Thompson said.

Many of the prices of items produced in China will be increased to compensate for the duties at American ports.

Walmart has announced that it will raise prices in response to the tariffs. Bank of America estimates Apple will have to raise the price of an iPhone made in China by 14% to account for the tariffs.

Though announced, both tariffs have yet to hit home just yet, said Frank Tamberrino, president and CEO of the Harrisonburg-Rockingham Chamber of Commerce.

Both countries’ tariffs are set on items that have left the shores of the countries. Most of the shipping between the United States and China is by sea, so the actual duties will not be collected until ships dock that left after the commencement of the tariffs.

“You’re looking a little bit down the line before people are seeing what the real impact is,” he said.

Contact Ian Munro at

574-6278 or imunro@dnronline.com.

Follow Ian on Twitter @IanMunroDNR

(3) comments

sbsheridan

One minor clarification: the U.S.-Mexico-Canada Agreement has not been finalized. There are issues yet to be resolved. This new agreement is quite similar to NAFTA, but the current administration saw the need to trash the first and replace it with its own treaty, which wasn't ready when needed. Could they have just re-negotiated the parts of NAFTA which were troublesome?

And how would an increase in the minimum wage -- which has been adopted in some states and localities, but not universally -- affect imports???

citizen t

I find it very interesting that everyone is concerned how this increase in tariffs will effect the price of products, but not once has it been discussed as a "side effect" of doubling the minimum wage.

paulgarber

Sign me up. Tariffs are essentially inflationary. Such as everything these days.

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