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Arkansas Businesses and Farmers Navigate the U.S.-China Trade War

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Today, the Arkansas Association of Asian Businesses (AAAB) held a workshop on how Arkansas businesses are navigating the U.S.-China trade war. The workshop’s diverse speakers provided deep dives on the trade war’s effect on various American industries, including international perspectives from a Chinese exporter and American importer of consumer goods, as well as a specific focus on the tariffs’ repercussions on Arkansas’ agricultural industry.

Opening the conference was Anna Tucker Ashton, senior director of government affairs of the U.S.-China Business Council, who had dire news. “81 percent of United States industries report being affected by the new tariffs,” said Ashton. “States with large agricultural industries and right-to-work laws have been particularly affected, and Arkansas’ economy has been really negatively impacted by China’s retaliatory tariffs on oilseeds and soy.” 

Following her speech, Derek Haigwood, a Newport soybean farmer and chairman of the United States Soybean Export Council (USSEC), spoke of the particular difficulties faced by U.S. soybean farmers that are a direct result of the ongoing U.S.-China trade war. Before the tariffs, China’s soybean demand dwarfed all other importers of U.S. soybeans, purchasing more American soy than all other countries combined. Additionally, soybeans are the largest row crop by acreage and largest agricultural export in Arkansas. Due to the particularly high soybean demand in China, the Trump administration used it as their strongest bargaining chip, or as  Haigwood says, “The soybean industry has been used as the tip of the spear in this trade war.”  

As a direct result of the trade war, Chinese importers cut their purchases of U.S. agricultural goods by more than half, from $19.5 billion in 2017 to just $8 billion so far in 2019. Closer to home, Haigwood says the prices he’s sold his soybeans have been strongly affected. “In 2017, right before the trade war, I sold my soy for about $10.69 a bushel. Today, the price has dropped to $8.50 per bushel, and on bigger farms with smaller profit margins that can be crippling,” says Haigwood. Recognizing the harm caused by foreign retaliatory tariffs, soybean farmers have recieved Market Facilitation Program (MFP) rebates from the federal government, but according to Haigwood, “We really appreciate the MFP checks, but what we need is open trade.”

In response to the trade war, USSEC has increased their imports to countries other than China by 22 percent, but as Haigwood says, “These trade relationships don’t happen overnight. They take decades to build, like how we started working with China over 35 years ago.” Haigwood sees expansion to other countries as an important future investment, but only a stop-gap measure for the present: “None of these other markets make up the loss. In order to replace China, we’d have to have a 92 percent market share in all other countries that currently import our soy,” says Haigwood.

Haigwood also spoke about the trade war’s unforeseen international consequences, caused by China looking elsewhere for its soybeans. “We have triggered our largest competitor, South American growers, that it’s time for them to move in to China. In fact, this year they’ll surpass the US in soybean acreage,” says Haigwood, “This trade war is short-sighted. People in my generation won’t have to deal with it, but my sons will when they inherit my soybean farm. That expanded production in Brazil and other South American countries isn’t going to go away, they’ll keep growing.” 

Haigwood went on to explain the tariffs’ effects beyond trade. “How many times have you heard on the news about them burning the Amazon rainforest? Do you know why they’re doing it?” Haigwood asked, rhetorically. “China’s South American imports have caused the clearing of hundreds of thousands of rainforest acreage, most of it for soybean production,” says Haigwood, “That not only hurts our environment, but it also results in a huge global supply increase of soy products, further driving down the price and hurting future farmers.” 

According to Haigwood, there are no clear solutions to this problem. “Farmland in Arkansas is mostly good for soy, rice and cotton.. None of those crops are doing very well right now, in fact cotton prices are so bad I quit growing it,” says Haigwood, although he notes than many farmers are switching to growing corn, with mixed success. “It’s just a really stressful time for farmers. In just the Southern region we’ve seen a 20 percent increase in farm bankruptcies. It’s going to take forever to see how this plays out.”

READ MORE: Between the Trade War and Floods, Arkansas Farmers Are Hanging Tough

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