Apr. 5, 2018
Farmers aren't the only ones upset about the escalating trade tensions between the Trump administration and China. It turns out, investors weren't thrilled either.
On Monday, China started tacking on tariffs on 128 U.S. products, a bulk of them agricultural. Nearly $1 billion in U.S. exports will be hit with 15 percent tariffs, including 120 products covering fresh fruit, dried fruits and nuts, wine, modified ethanol, American ginseng and seamless steel pipes. Another group of U.S. goods, valued at nearly $2 billion, are now facing another 25 percent levy, including pork and recycled aluminum.
The news helped lead the market sell-off: The Dow Jones industrial average closed down nearly 2 percent, or 450 points, after falling as much as 750 points, while the broader Standard & Poor's 500 index dropped more than 2.2 percent. Prices on lean hog futures for the May contract ended down 4.4 percent for the day and are off 20 percent since January.
Political impact: Many farmers across the country have been outspoken Trump supporters but that approval is bound to waver if the farm economy crashes, Robert Leonard, an Iowa resident and radio station news director, writes in an op-ed in The New York Times.
Farmers in the last year have faced one crisis after another - from drought to dropping commodity prices. The tariffs could be the final blow, he writes. The situation is so bad that people are starting to make comparisons to the farm crisis of the 1980s, when approximately 10,000 Iowa farmers lost their farms.
More to come?: It could get worse. The Office of the Trade Representative is expected to announce this week which Chinese technology products could be hit with punitive tariffs under an investigation it initiated as part of Section 301 of Trade Act of 1974. Trump had ordered the inquiry to examine China's policies and practices related to technology transfer, intellectual property and innovation.
That move could set the stage for even broader Chinese trade retaliation, potentially hitting top U.S. exports such as aircraft ($16.3 billion in 2017) and soybeans ($12.3 billion). USTR has said it would hold a hearing as part of 30-day public comment period on the proposed tariffs after the list is published this week in the Federal Register. That could lead to more ag groups speaking up about their frustration over the trade skirmishes.