FederalIssuesTaxes & SpendingU.S.-China Trade War Growing Concern For Texas Farmers

With the 10th largest economy in the world, Texas may find the trade war with China to have an outsized impact on key industries, including agriculture.
May 16, 2019
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On May 13, China announced it was raising tariffs between 10 and 25 percent on around $60 billion worth of goods. It will directly affect goods such as natural gas (of which Texas exported over 1.25 trillion cubic feet in 2017), beer, wine, swimsuits, and agricultural products. The move was Beijing’s response to President Trump’s move to raise tariffs 25 percent on more than $200 billion worth of Chinese goods.

President Trump said on Twitter in response to the news, “China buys MUCH less from us than we buy from them, by almost 500 Billion Dollars, so we are in a fantastic position.” He then offered his remedy for American consumers and producers, “Make your product at home in the USA and there is no Tariff. You can also buy from a non-Tariffed country instead of China.”

According to the U.S. Census Bureau, through the first three months of 2019, the U.S. has exported nearly $26 billion worth of goods to China and imported almost $106 billion. But the total trade value throughout that time frame between the two countries amounts to almost $132 billion — or nearly 15 percent less than January through March last year.

President Trump instituted initial tariff salvos on China on July 6, 2018, which were then ramped up last week.

Trump’s focus, however, remains on exports. However, the number of exports through the first three months of this year (six months after the tariffs have been in effect) dropped over 18 percent compared to the first three months of 2018.

The Texan Mug

Chris Bryan, a spokesman for the Texas Comptroller’s office, stated that they are monitoring the situation. He also added that “Since Texas is the number one exporting state in the country, any disruptions in international trade could have an adverse effect on Texans.”

Texas accounted for roughly 19 percent of all U.S. exports in 2018.

China is currently Texas’ third highest trading partner in terms of exports and the second highest trading partner for imports.

Gene Hall, communications director for the Texas Farm Bureau — an organization that lobbies on behalf of Texas’ farmers — was asked about the escalating trade dispute. He stated, “There is a lot of support among Texas farmers for what President Trump is trying to do,” which Hall clarifies as “making China behave on the world stage.”

China has engaged in practices like currency manipulation, ignoring subsidy limits established by the World Trade Organization, and engaging in intellectual property theft. However, Hall went on to say, the escalating trade war has “caus[ed] a lot of angst in the farming community.”

Many products grown by Texas farmers are subject to the tariff increase — which includes Texas’ number one agricultural export, cotton, of which Texas is the number one exporter in the U.S.; grain sorghum, China’s number one grain import (mostly supplied by Texas); and beef, of which Texas ranks number two nationally in exports.

Hall continued by expressing some concern for farmers.

“Net farm income in the United States has declined by more than half since 2013,” Hall emphasized, painting a picture of America’s farm economy lagging behind the overall economy. In order for the farm economy to rebound, Hall added, “we need a healthy and robust trading environment.”

As the trade war escalates, the market in China for exports looks more and more volatile.

The Texan also interviewed Richard Cortese, a farmer from Little River. Cortese grows corn, grain sorghum, and sometimes wheat depending on the year. Cortese said the dispute is having a substantial impact on farmers like him because “we’re already so far behind in terms of the cost of production to the increase in revenue.”

Cortese was especially worried about the “uncertainty” the dispute has injected into the crop market. “Five years ago I could sell corn at five to seven dollars per bushel, and now I’m selling it for between $3.50 and $4.25,” he lamented. Cortese went on to say, “what will significantly hurt us is if we don’t increase these export sales.”

Currently, the most significant agricultural product being hit with tariffs in the United States is soybeans. This worries Cortese because of the domino effect it could cause. Specifically, he said “As the cost to produce and sell soybeans goes up, more of those Midwestern farmers may focus more on corn,” which would reduce the value of his corn here in Texas.

China imposed a 25 percent tariff on U.S. soybean exports last year, causing prices to plummet for that particular commodity, and hitting U.S. soybean farmers especially hard.

All of these shifts in the agriculture market have unintended consequences, just like any other market.

In the larger scope of international trade, Hall stressed the importance of “free but fair trade” for Texas’ farmers. He lauded the USMCA trade agreement for what he sees as “upgrades” from its NAFTA predecessor.

Among the differences are things like the stiffening of intellectual property rules and automobile production clauses, but none that affect agriculture outside of dairy trade with Canada — which Hall specifically called an upgrade. Hall illustrated the importance of freer trade to Texas by stating, “Since NAFTA was implemented in 1993, exports to Mexico have increased 288 percent.”

Hall believes a similar goal can be achieved with China and will drastically improve conditions for Texas farmers.

Trade must be “as free and fair as possible,” Hall concluded.

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Brad Johnson

Brad Johnson

Brad Johnson is an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad watching and quoting Monty Python productions.