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July 6 Arrives, Can Trade War Work Out for Farmers in the End?

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Just after midnight this morning 25 percent tariffs on Chinese goods coming to the United States were set to go into effect. China was also set to retaliate with tariffs of their own on U.S. products, including soybeans, beef, chicken and pork. The stakes are high for farmers here and ag groups and many in Washington have been clamoring for the Trump administration to take a step back.

But one Chicago-based trader, Steve Erdman with EFG Group is hopeful farmers don’t get in a panic mode.

“This is not the 1980’s, and this is not Jimmy Carter in the presidency,” he said. “This is an era where we’ve got some hard-edged negotiators trying to negotiate a better trading position for the United States and for the U.S. exporter and importer, and I think at the end of the day they’re going to get it done. But, in the meantime it’s obvious that we’re getting roughed up a little bit. But, I think it’s going to be worth the wait, in my opinion.”

There is concern that eight and half dollar soybeans may have a 7 in place of that 8 if tariffs are enacted. Tom Fritz, one of Erdman’s partners at EFG says, yes that could happen.

“It may, and I’m thinking it comes sooner vs. later because I’ve got a sneaking suspicion that if these tariffs are enacted, we’ll get hit. We’ll get hit hard, but then what are you going to do for an encore given the break that the markets already had. I just have to question how much more is left on the downside if tariffs are enacted.”

Former USDA Secretary John Block just returned from China, and he reports there is plenty of concern over there too.

“It should be no surprise that China Daily newspaper blames President Trump,” Block said. “However, in meetings with U.S. Ambassador Terry Branstad and other U.S. Department of Agriculture reps, they made it clear that pressure needs to be exerted to force China to honor commitments made under the World Trade Organization.”

The high stakes for soybean farmers? China is the #1 customer. The country imported almost a third of all U.S. soybeans last year totaling about $14 billion in sales.

Brent Bible, a Romney, Indiana soy and corn producer released a statement on the eve of tariff implantation through Farmers for Free Trade:

“For soybean producers like me this is a direct financial hit. This is money out of my pocket. These tariffs could mean the difference between a profit and a loss for an entire year’s worth of work out in the field, and that’s only in the near term. Over the long haul, soybean producers are deeply concerned that China will continue to substitute American soy with soy from our global competitors. The losses these tariffs represent can’t and shouldn’t be made up by government programs. Frustration is growing quickly in the heartland, we need this solved now.”