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Economist analyzes China tariff threat

An agricultural economist believes tariffs on imported steel and aluminum will hurt United States agriculture.

China looks to impose tariffs on United States pork and soybeans, in response to the Trump Administration’s tariffs on imported steel and aluminum. Purdue University agricultural economist Chris Hurt says United States agriculture is a natural target for China.

“Obviously, China would look very quickly at agriculture,” Hurt said. “Why? Because they buy a lot of agricultural products from us. Checking some of the 2017 – China and Hong Kong bought $28.55 billion of agricultural products from us.”

China threatens to impose a 25% tariff on United States pork. Hurt says the tariff, if imposed, should not impact business with China greatly. He suggests the move would cost U.S. pork producers roughly $2 per head.

“My first guess is –  the pork market has over responded,” Hurt said. “When you’re looking at agriculture, it’s pretty important to recognize that while we’ve sold them $28.5 billion of Ag goods, soybeans are by far the big thing in that package.”

Soybeans encompass roughly 45% of United States agricultural products exported to China. Hurt says Chinese officials are more interested in negotiating current trade relations than imposing tariffs.

“I think they’re saying, ‘This is the really big issue we want to avoid: the United States thinking we’re going to go after soybeans. I think they want to negotiate. The Trump Administration’s style is to make bold statements to shock the world to get people to come to the table to talk,” Hurt said.

Hurt says producers can expect volatility until China and the United States make a decision.

“The bottomline is – nobody knows,” Hurt said. “It adds a lot of uncertainty; markets don’t like uncertainty. Meanwhile, we have our whole farm sector throughout the whole Midwest that is affected by that. They’re having to sell their product at more depressed prices, so we want to work through it. Tit-for-tat is probably going to go on for awhile. My reading is – much like the threats with North Korea, we felt like we were moving closer to some possible war and what ends up happening is we, hopefully, pull back from that brink.”