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CCBP Trade Wars: Tariff plans concern farmers, ranchers, others in Texas

Trade Wars: Tariff plans concern farmers, ranchers, others in Texas

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In his 40 years as a full-time farmer in North Texas, Charles Ray Huddleston has seen it all.

He’s weathered everything from ferocious storms to prolonged drought, encroaching development and volatility in commodity markets.

He persevered through the two-year U.S. grain embargo imposed in 1980 by former President Jimmy Carter in response to the Soviet Union’s invasion of Afghanistan. A young man at the time, Huddleston said it took him nearly a decade to recover.

But now he faces a situation that is potentially more perilous than any before.

President Donald Trump has ordered 25 percent tariffs on $50 billion of Chinese goods shipped to the U. S. China retaliated by slapping 25 percent tariffs on U.S. goods exported to China. Trump is threatening to raise the ante to $400 billion in tariffs on Chinese imports.

The escalating trade war with China as well as other nations, including Mexico and Canada, could have dire consequences for farmers across the country, with Texas farmers predicted to be especially hard hit.

“It’s always agriculture that takes it in the shorts,” said Huddleston, a fourth-generation farmer, who farms about 3,500 acres straddling Collin and Denton counties and lives in Celina. “They say the government doesn’t pick winners and losers. I don’t see it that way anymore.”

Huddleston and others say foreign markets are extremely important to farmers. He produces sorghum grain, wheat, corn and cotton – all commodities targeted by new tariffs.

The Trump administration imposed a 25 percent tariff on $34 billion of Chinese goods on July 6 in response to complaints that Beijing steals or pressures companies to hand over technology. Beijing responded by imposing similar duties on the same amount of imports from the United States.

The Trump administration also has imposed tariffs on steel and aluminum imports, including from the European Union.

The U.S. tariffs, so far, have already prompted the European Union to respond by slapping equivalent tariffs on U.S. products including bourbon whiskey, Levi’s jeans and Harley-Davidson motorbikes. Further tit-for-tat measures could be on the horizon — and could harm producers on both sides.

Texas is a leading state to be hit by retaliatory tariffs by China, Canada, Mexico and the European Union.

Agricultural commodities are among a lengthy list of products subject to tariffs. Other products impacting Texas include polymer sacks and bags, whiskey and steel and aluminum.

Steel and iron are especially important in Texas for production of pipe and casings for extracting oil and gas from the ground, a top Texas industry.

The total amount of Texas exports jeopardized by new tariffs is $3.8 billion, according to the U.S. Chamber of Commerce, which says 3.15 million Texas jobs are supported by trade.

“Tariffs imposed by the United States are nothing more than a tax increase on American consumers and businesses, including manufacturers, farmers and technology companies, who will all pay more for commonly used products and materials, “ the U.S. Chamber said in a statement. “Retaliatory tariffs imposed by other countries on U.S. exports will make American-made goods more expensive, resulting in lost sales and ultimately lost jobs here at home.

“This is the wrong approach and it threatens to derail our nation’s recent economic resurgence,” the statement said.

The Fort Worth Chamber of Commerce has yet to make a statement on the tariffs but is in the process of surveying members on various policy issues, including tariffs, chamber officials said.

Mexico is the leading market for Texas exports, with about $1.65 billion threatened by new tariffs. New tariffs threaten about $1.3 billion in exports to China, as the second top market for Texas products, according to data from the U.S. Chamber.

The Dallas-Fort Worth market is the ninth largest exporter in the U.S., according to 2016 data from the U.S. International Trade Administration, the latest available. A total of $27.2 billion in goods was exported from the area that year.

Exports from DFW, and surrounding counties, have increased $4.7 billion since 2006 and exports have risen 1.9 percent annually during the past 10 years, according to trade administration.

As the top market for DFW exports, Mexico accounts for 17 percent of total exports. Following in order are Canada, Germany, China and Japan.

Top exports from the area are computer and electronic products, transportation equipment, chemicals and machinery. Computers and electronic products accounted for 27 percent of the region’s exports in 2016.

“Tariffs are not a good idea and they are unfair and they won’t bring back jobs,” said John T. Harvey, an economics professor at Texas Christian University. ”Subsidies are a much better solution.”

Throughout the years, subsidies have helped buoy the agricultural industry, which is most susceptible to volatility and low profit margins, according to experts.

In the escalating trade war, Texas agricultural products are the most threatened by export tariffs, with grain sorghum exports to China leading the pack with nearly $494 million in exports jeopardized, according to U.S. Chamber data.

“It’s shut us down,” said Wayne Cleveland, executive director of Texas Sorghum Producers, a 3,400-member industry group. “Texas has been a robust market for grain sorghum since 2014 and now we’ve got our product sitting in storage.”

Texas accounts for nearly 60 percent of the U.S. exports of grain sorghum to China and with Chinese buyers cancelling orders, growers are losing an average of 35 cents a bushel, amounting to millions in lost revenue, Cleveland said.

Besides a direct hit, some agriculture producers foresee an indirect hit from the tariffs.

Pete Bonds, a long-time Tarrant County rancher who operates a large and successful operation that has spread to other states, said beef is not a major export, but that pork is a significant foreign export, especially to Mexico. Tariffs on pork, though, could reverberate through the beef market in the U.S.

“If we see a glut of pork products here, it‘s going to put downward pressure on beef,” said Bonds, who is past president of the Texas and Southwestern Cattle Raisers Association.

The Fort Worth-based American Pecan Council is taking an optimistic approach to tariffs, as are other agricultural producers, by searching for new markets and trading partners. The U.S. produced more than 300 million pounds in 2016 and Texas growers ended 2017 with production of 47 million pounds of the popular nut.

“We are confident in the strength of the American pecan industry,” said Alex Ott, executive director of the American Pecan Council. Market conditions regularly shift and this is not the first time that pecans have been subjected to tariffs – in China or other foreign markets.

“As an industry, we’ll continue to align our efforts with U.S. policy while working to be a good partner to each of our markets,” Ott stated.

With profit margins for growers being historically low, one of the biggest tragedies that could emerge from the tariffs is that it will force more farmers and ranchers out of business, said Jason Johnson, an associate professor and extension economist with Texas A&M University and Texas AgriLife Extension in Stephenville.

“Maybe at the end of all this, the U.S. will have better trade deals that are more equitable but in the interim, there’s going to be a lot of hurt for farmers and ranchers,” said Johnson, who is also a fourth-generation Texas rancher.

Farming and ranching are part of American and Texas heritage and people choose this work out of a sense of self-determination to provide for themselves, to perpetuate family tradition or because of the lifestyle, Johnson said.

“The average age of a farmer is mid-60s,” Johnson said. “When this is all said and done, they may be too old or unable to fight back.”

That is certainly something that Huddleston, who once worked alongside his father and now works alongside his son, worries about every day.

“My way of life is fixing to change,” he said. “I tell my son that I made this work for me but you’re probably going to have to get some other type of job.”

– This report includes Associated Press material.

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