The unexpected side effects of Trump's trade war
Several weeks ago, John Boyd’s combine broke down. The machine is an absolute necessity for Boyd—he, like most commodity farmers, uses it to harvest the soybeans, corn, and wheat he grows every year in Baskerville, Virginia. What he really needs is a whole new combine, which would allow him to harvest his crops more efficiently, and which would last him much longer than fixing his current machine or buying a used one. But a new combine would cost him more than $480,000. With his farm income down and equipment prices up, “I haven’t been able to buy anything at all,” Boyd says.
Like farmers around the country, Boyd is in the crosshairs of the trade war, caught between the 25 percent tariffs that the United States has imposed on imported raw materials such as steel and aluminum and the retaliatory tariffs that China and other countries have imposed on major American agricultural exports, especially soybeans. Though the United States and China have been trying to negotiate a new trade deal, a resolution isn’t likely to come until at least April.
The trade war almost couldn’t have come at a worse time for the agricultural industry: Farm debt is on the rise, farm income is in a three-year trough, and the American Farm Bureau Federation’s chief economist said last month that many farmers are dependent on off-farm income to keep their operations running. But farmers can’t push pause on their crops to try to wait out the trade war—they’re at the beck and call of the planting and harvesting seasons.
“Everything’s going up in price, but also the cost of labor is going up,” says Taylor Brooks, a salesperson at Boyd’s local equipment dealer, James River Equipment in Tappahannock. For now, Boyd, the founder and president of the National Black Farmers Association, has decided to spend about $2,600 on parts and fix the combine himself. If he were to pay someone else to do it, he estimates that it would cost him about $8,000.
Some large equipment manufacturers, including John Deere and Caterpillar, announced almost immediately after the tariffs were implemented last summer that they would raise their prices to adjust for the higher price of steel and aluminum imports. It’s not just large manufacturers, though—small, locally based equipment manufacturers have also had to raise prices or look elsewhere for steel. In Montana, a horse-trailer manufacturer was forced to hike prices by about 20 percent last summer because of the tariffs. Bank of America Merrill Lynch downgraded John Deere’s stock in February, citing “a real risk to farm equipment demand” if the trade war continues.
https://www.msn.com/en-us/money/markets/the-unexpected-side-effects-of-trumps-trade-war/ar-BBUXN8k?li=BBnbfcL
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