New reports show impact of Trump’s trade war on solar, ag
Author: Marianne Goodland - September 13, 2018 - Updated: September 27, 2018
President Donald Trump’s tariff and trade polices have hit more than just the agriculture industry, according to a report released Thursday by the trade association for the solar industry.
Also on Thursday, the U.S. Department of Agriculture put out a report showing how they calculate damage to the values of crops and livestock from tariffs imposed by the Trump administration.
Last week, Secretary of Agriculture Sonny Perdue announced the launch of a “trade mitigation” package, valued at up to $12 billion, to pay farmers and ranchers for losses due to “unjustified trade retaliation by foreign nations.” The USDA’s announcement doesn’t mention the foreign tariffs came in response to tariffs announced by Trump on June 15.
The trade mitigation package includes several programs, including a “Market Facilitation Program,” which will provide payments to farmers and ranchers; and a distribution program that allows the USDA to buy certain commodities impacted by the foreign tariffs (corn, cotton, sorghum, soybeans, wheat, dairy, or hogs) and distribute those products to schools, food banks and low-income households.
The USDA also plans to run a trade promotion program to help farmers “find and access new markets” through “consumer advertising, public relations, point-of-sale demonstrations, participation in trade fairs and exhibits, market research, and technical assistance.”
In his analysis, the USDA’s chief economist looked at the impact of tariffs from China, the European Union, Mexico, Canada and Turkey.
For example, on corn tariffs, the economist estimated the damage from tariffs imposed by China and the European Union at $192 million. In 2017, those markets imported $309 million worth of corn. With the 25 percent tariff imposed by those markets on U.S. corn, that reduced the imports to $117 million, according to the economist.
The initial market reimbursement rate, based on 14.6 billion bushels of corn, is about a penny per bushel, according to the economist’s calculations.
According to a statement from Perdue, the assistance to farmers and ranchers is intended to be short-term. That will not mitigate the long-term damage, given that trade relationships are built up over decades, according to several experts.
Trevor Kincaid, former Deputy Assistant U.S. Trade Representative for Public Affairs in the Obama administration, wrote recently that a trade war could result in long-term damage to U.S. agriculture, because the nations upon which tariffs have been imposed will just go elsewhere for those commodities. That includes “Brazil, Canada, Argentina, or Russia – among other competitors. No aid package will bring back those markets,” Kincaid wrote.
Take soy, for example. Kincaid wrote that Brazilian soybean exports to China “rose to nearly 36 million tons in the first half of 2018, up 6% from a year ago. In July alone, they surged 46 percent from the same month a year earlier.” Brazilian farmers are switching from sugar cane to soy in order to satisfy that new demand, Kincaid wrote.
In July, just as the first round of tariffs went into effect, U.S. agricultural export prices fell 5.3%, according to data published by the U.S. Department of Labor.
Mark J. Perry, writing for the conservative American Enterprise Institute, said last month that “Trump and his fellow protectionists” ignore the fact that global trade is based on “‘complex, interconnected networks of suppliers, regulators, inspectors, shipping routes, and value chains,’ and on relationships between buyers and sellers that often take many decades to build.”
The U.S. Chamber of Commerce estimates Colorado farmers could lose $188 million per year, largely due to tariffs imposed on pork and cheese products by Mexico. Another $30 million in exports are targeted by tariffs from China on aluminum, animal parts and passenger vehicles, and Canada is targeting $50 million in Colorado exports on bread, pastries, cakes, aluminum cans and casks.
The trade war has caused a rift between the administration and traditional conservative allies — the U.S. Chamber, the American Enterprise Institute and the Heritage Foundation, for example — all which are sounding alarm bills both about the trade war’s long-term impact and the bailout package.
Meanwhile, the U.S. solar industry says it also is feeling the pinch from the trade war.
Thursday, the Solar Energy Industries Association and Wood Mackenzie Power & Renewables released a report showing that tariffs “took a bite out of the solar market” in the second quarter of 2018.
According to Abigail Hopper, CEO of the solar group, “tariffs have dampened solar’s growth, as previously announced projects were canceled or delayed due to the tariffs. Yet, this report also reveals that the solar industry is simply too strong to be kept down. Procurement numbers show that solar is poised for substantial growth.”
The report estimates the solar market will be largely “flat” in 2018 but should rebound by 2020.