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Tariffs, Resignation, and Prices Light Up Holiday Week Headlines
While many people around the country were celebrating Independence Day with food and fireworks, this week’s headlines put on a show of their own. Despite the midweek holiday, news was anything but slow.
Over the last five days, tariffs on products going to China have been put in place, EPA Administrator Scott Pruitt has resigned, and soybean futures prices have climbed 25¢.
Here’s a recap of the three biggest events from this week.
Trade tension between the U.S. and China has been escalating quickly since President Donald Trump first announced tariffs at the beginning of 2018. See this timeline for more details.
On Friday, U.S. tariffs on $34 billion of goods it imports from China officially went into effect. As promised, the Chinese immediately retaliated with additional tariffs on $34 billion of U.S. goods imported into the country.
Reuters reported that just before the tariffs took effect, President Trump warned that the U.S. may ultimately target more than $500 billion worth of Chinese goods, or roughly the total amount of U.S. imports from China last year.
A wide range of industry leaders and local officials expressed their concerns about the lasting damage these tit-for-tat tactics could have on the long-term trading relationship between the two countries.
“The continued escalation of trade tensions with China is having a real impact on Iowa farmers and businesses. We have seen a significant drop in prices for both crops and livestock and this is creating even more stress and uncertainty during what was already a difficult time for the ag economy,” said Iowa Secretary of Agriculture Mike Naig.
Naig continued by urging the Trump administration to find a solution to trade disputes with China quickly in order to provide market certainty to agricultural producers.
“There are real issues in our trade relationship with China that need to be addressed, but Iowa agriculture cannot continue to bear the brunt of the retaliation from our trading partners,” he said.
On a conference call with media Friday morning, several mayors of cities along the Mississippi River explained how they are bracing for the ripple effect of the newest round of tariffs.
Lionel Johnson is the mayor of St. Gabriel, Louisiana, and serves as the co-chair of the Mississippi River Cities & Towns Initiative. He said, “My city resides just south of Baton Rouge, where the port of southern Louisiana begins. Louisiana is set to be the hardest hit state from proposed tariffs overall with the vast majority of that impact coming from soybeans; not because we are a top soy-producing state, but because we are the gateway port for that product to the rest of the world, and China is the largest destination – 20% of all U.S. imports and exports pass through Louisiana ports.”
According to a press statement issued by the Mississippi River Cities & Towns Initiative, agriculture is the third-largest economy on the Mississippi River and generates $33 billion in annual revenue in addition to directly supporting 192,000 jobs in the area.
“More than 20,000 jobs in my region are dependent on the soybean industry. Some of our farms export 100% of their soybeans. People’s livelihoods are on the line here,” stressed Jay Hollow. He is the mayor of Helena-West Helena, Arkansas.
American Soybean Association president and farmer John Heisdorffer was also on the call. “We have spent more than 40 years building this market with China, and it is not a market U.S. soybean farmers can afford to lose,” he said, explaining that losing a market with China will be especially difficult for young and beginning farmers to overcome.
Heisdorffer continued, “I’ve spent a lot of time myself the last 23 years either on state or national boards promoting U.S. trade. If we lose all of that, my son, who farms with me, is going to spend the rest of his lifetime trying to get that back. That scares the heck out of me.”
On Thursday President Trump announced the resignation of EPA Administrator Scott Pruitt via Twitter.
The tweets read, “I have accepted the resignation of Scott Pruitt as the administrator of the Environmental Protection Agency. Within the agency Scott has done an outstanding job, and I will always be thankful to him for this. The Senate confirmed deputy at EPA, Andrew Wheeler, will on Monday assume duties as the acting Administrator of the EPA. I have no doubt that Andy will continue on with our great and lasting EPA agenda. We have made tremendous progress and the future of the EPA is very bright!”
Although many in agriculture were supportive of the EPA’s rule to postpone the applicability date of the 2015 WOTUS rule until February 6, 2020, under Pruitt’s leadership, his more recent battles with the ethanol industry were not as popular.
Emily Skor, CEO of Growth Energy said, “Administrator Pruitt’s tenure as administrator of the EPA put a heavy strain on this administration’s relationship with supporters, farmers, and biofuel producers across the heartland. We urge the EPA under the new leadership of acting Administrator Wheeler to reinforce those bonds and work as a partner to the U.S. Department of Agriculture and the White House in efforts to revitalize rural communities and unleash American biofuels. He can start today by reversing the demand destruction caused by EPA waivers, acting on the president’s pledge to unlock E15, and upholding a strong Renewable Fuel Standard (RFS).”
North Dakota farmer and the president of National Corn Growers Association Kevin Skunes echoed, “It’s no secret corn farmers have been frustrated with Scott Pruitt’s ongoing actions over the past year that have seriously undermined the Renewable Fuel Standard (RFS). Even with this leadership change at the EPA, our priorities do not change. We will continue to push the EPA to stop granting unjustified RFS waivers. We expect the EPA to account for the more than 1.6 billion gallons the agency waived from 2016 and 2017 RFS obligations, and we will continue to ask EPA to follow through on the president’s commitment to remove outdated regulations to allow higher blends of ethanol like E15 to be sold year-round. We are hopeful Acting Administrator Andrew Wheeler will work with America’s corn farmers to give consumers more options at the pump to save them money and reduce emissions and provide farmers with certainty in the marketplace that comes with RFS integrity.”
Friday’s 38¢ rise in soybean futures price helped recapture losses from earlier in the week after hitting nearly a 10-year low on Thursday.
Jack Scoville, The PRICE Futures Group’s senior market analyst, says that Friday was a sell-the-rumor-and-buy-the-fact kind of day.
For more information about the recent market volatility, read U.S. Soybean Market Surges 38¢ Friday. Markets editor Mike McGinnis explains more about the trade’s reaction to this week’s big news in Will China’s Soybean Tariff Have Long Tail?