US farmers could take a significant hit from trade war

  • U.S. tariffs on $34 billion worth of Chinese goods are set to take effect just after midnight Friday ET.
  • The retaliatory tariffs China is imposing affect a wide variety of American agricultural products, including pork, soybeans and wheat, as well as U.S. autos.
  • U.S. farmer profits are at some of their lowest levels in more than a decade, according to the Department of Agriculture.

The Trump administration's tariffs, a 25 percent duty on $34 billion worth of Chinese goods, are set to take effect 12:01 a.m. EST on Friday. Beijing has said it would retaliate immediately with tariffs of its own.

That leaves U.S. farmers in the crossfire.

"Rural communities are dependent on agriculture. It’s their life blood," Casey Guernsey, a seventh-generation beef farmer in the Missouri-Kansas-Iowa area, told CNBC.

China's new tariffs will impact a number of American agricultural products, including soybeans, wheat, corn, cotton and pork, as well as U.S. autos.

Beijing's import levies could end up costing farmers in the state of Missouri as much as $138 million annually, said Guernsey, owner of CL Guernsey, a family farm. That includes the impact of lower prices for farm commodities and potential lost business due to new import duties.

One in four pigs raised in the U.S. is sold overseas, and the Chinese are the world's top consumers of pork. Missouri is one of the top 10 states in pork production.

"We can't afford any increase in price," Guernsey said on "Closing Bell" Thursday. "The difference between making money and losing money per head sometimes is just a couple of dollars. And whenever you’re looking at duties like this, it could make or break the operation."

In fact, the tariffs might only make the situation worse for some farmers. The agricultural economy has been in a down slump for more than a decade. Profits from U.S. farms are forecast to reach a 12-year-low in 2018, according to the Department of Agriculture.

Cows graze on a dairy farm in Porterville, California.
Robyn Beck | AFP | Getty Images
Cows graze on a dairy farm in Porterville, California.

President Donald Trump first proposed tariffs last March in an effort to fix what he deemed unfair trading practices and help both American consumers and business owners. Tariffs against Canada, Mexico and the European Union went into effect on June 1. Since then, Mexico, Canada and the European Union have issued retaliatory tariffs of their own, targeting items such as agricultural products, steel, motorcycles and spirits.

Ron Moore, a farmer from Roseville, Illinois, and the chairman of the American Soybean Association, said the tariffs are "devastating" to soybean farmers.

In fact, nearly $14 billion worth of soybeans exported to China will be impacted by tariffs. That's roughly one third of the total soybean production in 2017. With the new tariffs in place, many farmers fear China will cancel soybean shipments to the U.S. for the remainder of the year.

Guernsey said he's already seeing the negative effects play out in the farming community. Mexico, he said, is one of the top partners for beef products. "And we can't afford to lose that market whatsoever," Guernsey said.

The farmer, who also served as a Missouri state representative, said he was planning on building a new barn this year, but said it's now no longer economically feasible. Among his farm customers in Missouri, he said many are selling off their breeding stock.

"And that has long-term implications, not just for their farm, but for ours and for the entire community," Guernsey said.

Moore said he understands the Trump administration's goals in imposing the tariffs and acknowledged that "mostly rural America" supported Trump during the election.

"We just think there are alternative choices to go about trying to bring China to trade fairly, [rather] than going into the tariff wars," he said on "Squawk Alley" on Friday.

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