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Purdue Ag Economist Breaks Down China Tariff Threat

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Purdue Ag Economist Breaks Down China Tariff Threat

Dr. Chris Hurt

Purdue University agricultural economist Chris Hurt says the tariffs by the Trump administration on steel and aluminum imports puts U.S. agriculture in harms way regarding trade. China’s wasted no time in coming up with a $3 billion list of U.S. targets for retaliation which includes U.S. soybeans and pork, among other U.S. ag products.

China is threatening a 25 percent tariff on U.S. pork. Even with that tariff, Hurt does not expect the U.S. to lose all business in China, which would cost the U.S. producer two dollars per-head. Further, he points at a recent downturn of four dollars in the futures market.

“My first guess is to say that the pork market has way over responded. When you look at agriculture, it’s pretty important to recognize that while we sold them $28.5 billion of ag goods, soybeans are the big thing in that package.”

Soybeans represent roughly $12.5 billion of the $28.5 billion of U.S. ag products exported to China. Hurt says it appears that China is more interested in negotiating on soybeans.

“That is the really big issue. That (China) wants to avoid the United States thinking we’re going to go after soybeans. I think they’re saying, ‘we want to negotiate’. The Trump administration kind of has a style to make bold statements to shock the world, then to get people to come to the table to talk.

In the meantime, Hurt says to expect volatility.

“The bottom line is nobody knows. It adds a lot of uncertainty; markets do not like uncertainty. Meanwhile, we have our whole farm sector throughout the Midwest that is affected by that. They’re having to sell their products at more depressed prices.”