U.S. farmers and food producers are in the crosshairs of a global trade conflict that shows no signs of abating anytime soon — and trade tensions escalated in a big way Sunday.
New tariffs were imposed by Canada on beef, and more retaliation will come this week when China and Mexico take aim at pork. China’s also planning a 25 percent tariff on soybeans this Friday in addition to hikes on pork duties, and Mexico’s 20 percent levy on "the other white meat" is set to begin Thursday.
Meanwhile, the European Union’s initial duties worth $3.2 billion took effect June 22. Most of the duties amount to 25 percent, and include a variety of U.S. products, including motorcycles, boats, whiskey and peanut butter. All three U.S. allies announced new tariffs in response to the Trump administration's decision to impose levies on imported steel and aluminum products for national security reasons.
Separately, China is preparing to unleash a wave of new tariffs of 25 percent on , including soybeans and some dairy products. The duties become effective this Friday, with U.S. autos also a target of Chinese import duties.
Canada strikes back
For Canada, tariffs of 10 percent are being imposed on about $12.5 billion worth of U.S. products. Starting Sunday, a wide range of U.S. staples were hit, including chocolate, ketchup, yogurt, beef, caffeinated roasted coffee, orange juice, maple syrup, salad dressing and soups.
Dairy is one of the sticking points between the U.S. and Canada in renegotiation of NAFTA, the North American Free Trade Agreement — but it's probably not the reason Ottawa selected yogurt for tariffs. Instead, it may have been done to get the attention of House Speaker and Wisconsin Republican Paul Ryan. Canadian imports of yogurt from the U.S. totaled a mere $3 million last year, and mostly came from a plant in Wisconsin.
Also, by selecting soups the Canadian government may have had a message for New Jersey-based Campbell Soup, which in January announced plans to halt production of soup and broth in Canada and cut about 380 jobs.
"With a 10 percent tariff on soups and broths and tomato products — representing the core of Campbell's products that are sold in Canada and made from both U.S. and Canadian ingredients — Campbell estimates the economic impact to our Canadian business to be significant," said company spokesperson Alexandra Sockett in an emai to CNBC. "We are evaluating ways to offset the potential tariff impact and working closely with our customers."
Ottawa released a final list of products facing tariffs on Friday, and it included some new products such as pillows but removed mustard. Ketchup stayed on the final list along with toilet paper and whiskey.
Kraft Heinz's ketchup is the market share leader in Canada but the U.S.-based company closed a factory in Leamington, Ontario, in 2014 and trimmed more than 700 jobs. French's, the mustard maker, sells Canadian-made ketchup, in a partnership with Toronto-based Select Food Products. The French’s brand is owned by Baltimore-based McCormick & Co.
"As a global food company, Kraft Heinz opposes trade policies that impose taxes or tariffs on our products," company spokesman Michael Mullen said in an emailed statement to CNBC. "NAFTA has been in place for more than 20 years and we have developed supply chains that run across North America."
American exports of sauces and condiment products to Canada totaled approximately $650 million last year, according to data from analytics firm WiserTrade. The U.S. sold about $55 million in whiskey to Canada in 2017.
'Kick in the shin and the elbow'
About 95 percent of the products on Beijing's target list are from agriculture or food sectors, including soybeans — one of the most critical exports of the U.S. farm economy.
Farmers have been bracing for the consequences of soybean tariffs, since they could hammer a lucrative export market, reduce profits and have ripple effects across the rural economy. The U.S. could see an economic loss of $3 billion from the soybean tariffs, according to Purdue University estimates.
China buys about half of U.S. soybean exports, or about $14 billion annually, and roughly 1 in 3 rows of soybeans grown on the nation's farms goes to the world's second-largest economy, according to the American Soybean Association.
"It really puts us with a big 'bull's-eye' on our back, you might say, because agriculture is usually the first and the easiest to implement (tariffs) and to get everyone's attention — and they're sure doing that," said soybean farmer Richard Guebert Jr., president of the Illinois Farm Bureau.
China's tariff action is in response to the White House's June 15 announcement that it would slap 25 percent duties on Chinese goods, mostly on items from the aerospace, robotics and machinery industries. The bulk of those duties, or about $34 billion worth of imports from China, will see levies collected starting this Friday.
Besides soybeans, China's new tariffs impact pork, wheat, rice and dairy, as well as a variety of fruit and vegetable products. , and the Chinese are the world's top consumers of pork.
"We do feel like we're getting kicked in the shin and in the elbow all at the same time," said Joe Steinkamp, who grows soybeans and corn in southern Indiana. "Farmers need that export market, and if we don't have it then they will suffer and rural communities are going to suffer."
At about $1.1 billion, mainland China and Hong Kong together are among the top export markets for U.S. pork based on value, according to the U.S. Meat Export Federation. Last year, China was the second-largest volume market for American pork, after Mexico.
Experts say by targeting high-value U.S. farm exports such as soybeans and pork with punitive tariffs, China was sending a message to President Donald Trump, since the two farm products are primarily from Midwestern states that helped him win the 2016 election.
"They are clearly designed to hit back at the heartland of America, and raise the costs of agricultural farm exports to China that will reduce consumption in China and force them to look for alternatives," said Robert Holleyman, a former senior trade official in the Obama administration and now president of C&M International, a Washington consulting firm.
In the case of pork, the retaliation is especially painful for American farmers, and shows just how brutal the trade tussle has become between Beijing and Washington. The pork industry still is reeling from 25 percent tariffs China imposed back on April 2.
"Pork products into China could start to take an immediate hit," said David Salmonsen, senior director of government relations at the American Farm Bureau Federation, the nation's largest farm organization. "We'll see how much but they will have a pretty high tariff for getting into that market.
China's additional levies also apply to various seafood products, including salmon, tuna, shark fins, crab, shrimp and lobster. The U.S. exported more than $1.3 billion worth of seafood to China in 2017, with Maine lobster alone accounting for more than $90 million of that amount last year.
Mexico
As for Mexico, the country responded to Trump's steel and aluminum tariffs in early June by announcing penalties on more than a dozen agricultural products, including a planned 20 percent duty on pork. Mexico slapped unprocessed pork with an initial 10 percent tariff on June 5: That increases to 20 percent effective this Thursday.
More than $1 billion in U.S. pork products were exported to Mexico last year. U.S. pork hams are top sellers in Mexico, but friction over the border wall and renegotiation of NAFTA has led Mexico to look elsewhere for key agricultural and food products, including pork, soybeans and corn.
Mexico also is a major buyer of U.S. dairy products such as cheese. U.S. cheese exports will face new tariffs of 20 to 25 percent effective this Thursday, an increase from the current 10 to 15 percent levies in place since June 5.
Overall, Mexico's tariffs announced in June cover $3 billion worth of American goods. Mexico and Canada together represent nearly one-third of total U.S. agricultural exports.
According to Reuters, Mexico has been studying additional tariffs that could be even more painful for American farmers, including levies on U.S. corn and soybeans. Mexico was the top export market for U.S. corn last year.
Corn exports to Mexico were valued at more than $2.3 billion in the most recent year, and soybean sales topped $1 billion.
European Union
Continental Europe also has weighed in with its own set of tariffs in response to the White House's duties on imported steel and aluminum.
The EU tariffs that were implemented on June 22 apply to about 180 different products, or about $3.4 billion worth of American goods.
The products with import duties of 25 percent include motorbikes, jeans, boats and whiskey, as well as agricultural products like sweet corn, rice, tobacco, peanut butter and orange juice.
Europe is a key foreign market for Wisconsin-based Harley-Davidson, accounting for about 16 percent of the motorcycle maker's sales last year. The manufacturer announced June 25 in a regulatory filing that it would shift some production of motorbikes outside the U.S. to help it "avoid the tariff burden." The iconic American company's decision to relocate some production overseas didn't sit well with Trump. He tweeted: "I've done so much for you, and then this."
https://twitter.com/realDonaldTrump/status/1011994162076573697
Clarification: EU tariffs were implemented on June 22.
WATCH: Impact of tariffs on agriculture
