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Trade War Could Devastate Iowa’s Ag Economy

April 4, 2018 10:00 am by: Category: 2018 Session Information, Featured, Recent News Leave a comment A+ / A-

Iowans are deeply concerned about a looming trade war that could impact Iowa pork, soybeans, ethanol, and other agricultural exports.

The President’s decision to impose $60 billion in tariffs caused the Chinese to in turn announce tariffs on American goods, including a 25% tariff on pork and higher tariffs on ethanol and soybeans. Iowa is the number one in pork production, number one in production of ethanol and number two in soybean production.

After the tariff was announced, pork prices dropped about $6 per market-weight pig, potentially costing Iowa pork producers $240 million. And the damage is likely to grow because China is the second largest market of U.S. pork in the world at $1.1 billion in U.S. Pork last year.

The export of variety meats are of particular concern to Iowa producers. These meats, like intestines, the head and tails, are not consumed much in the United States but are in demand in China. China takes about 1/3 of U.S. Pork variety meat, resulting in significant value added to Iowa pigs and as a result Iowa pork producers and rural Iowa. Variety meats that may sell for 5 cents in the U.S. will go for 20 cents in the Chinese market, a significant value addition.

The biggest agricultural export from the United States to China is soybeans and Iowa is the second largest producer of soybeans in the country. Soybeans have been rumored to be the target of Chinese tariffs moving forward and would deal another blow to rural Iowa.

China is also proposing adding 15% to the existing 30% tariff on ethanol. Iowa is the nation’s leader in ethanol production, shipping out 4.2 billion gallons of ethanol last year. The impact of the additional tariff on ethanol would also significantly drive down corn prices since 53% of Iowa’s corn production goes to ethanol production.

 

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