Modern Tire Dealer

DEC 2018

Magazine for the professional tire industry

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8 N e w s / V i e w s M T D D e c e m b e r 2 0 1 8 T ire dealers have focused plenty of at- tention on tire tariffs in recent years, but in 2018 in farm country, it's just as critical for dealers to know how tariffs imposed on American crops are affecting their farm customers. is issue of Modern Tire Dealer puts farmers and the ag industry front and center. Check out our cover story on page 60 to meet a three-generation tire dealer who is utilizing the latest tire technology to boost business. American farmers depend on the global market, because they grow far more than what the U.S. consumes. According to the Economic Research Service at the U.S. Department of Agriculture, the value of agricultural exports grew 150% from $56.2 billion in 1995 to $140.47 billion in 2017. In that same 22-year span, U.S. exports to East Asia more than doubled, from $21.63 billion to $45.98 billion. It's in East Asia, and specifically China, where there's turmoil. President Donald Trump's aggressive efforts to balance U.S. trade with China have resulted in China's President Xi Jingping levying tariffs on American products. Among the hardest hit industries is agriculture — sorghum, soybeans, pork and ethanol have all been targeted. In early December the two coun- tries declared a 90-day truce to their back- and-forth tariff tactics to negotiate. Researchers at Iowa State University aren't waiting for the politicians; they're already studying the effects of an agricul- tural trade war. e university's Center for Agricultural and Rural Development partnered with the Chinese Academy of Agricultural Sciences to create the Center for China-U.S. Agricultural Economics and Policy. Wendong Zhang, an assistant professor of economics at Iowa State, is among the center's staff. In November, Zhang was among the keynote speakers at an annual conference of farm managers and rural appraisers. His talk focused on China as the leading trade partner of U.S. agriculture. Zhang said China is the fastest grow- ing market for U.S. agriculture, ahead of Canada, Mexico, Japan and South Korea, and that the U.S. holds a "large and consis - tent" agricultural trade surplus with China. As the Chinese people attain more wealth, Zhang said there will be an even greater demand for more protein. e demand for fresh dairy is projected to grow by 7 million tons from 2018 to 2027. While in some regions of the world the demand will be focused on one or two products, Zhang said China's new middle class will want "more of everything." But that doesn't mean the U.S. has a guaranteed market for years to come. Zhang said, "China will retaliate, diversify and find other suppliers if possible." is year the country increased its soy production by 9% by subsidizing land used to grow the crop. (In 2016, China imported $34.4 billion of soybeans from the U.S.) e researchers at Iowa State consider the world view, but they also study the impact of these trade issues on their home state. Here's how the Center for Agricultural and Rural Development summarized the annual impact of this year's trade disrup- tions on the Iowa economy: • Overall loss to Iowa's gross state prod- uct — at least $1 billion, based on a gross state product of $190 billion; • Average loss to Iowa's $5.2 billion soybean industry — $545 million; • Average loss to Iowa's $8.5 billion corn industry — $333 million; • Average loss to Iowa's $7.1 billion pork industry — $776 million; • $105 million in lost revenues from ethanol, due to a 2% drop in ethanol prices. And those losses don't account for tax revenue or labor income, which could add another $477 million to $630 million to the loss column. (ere's federal money available to offset some of those losses.) e real risk is that U.S. farmers might not recover and recapture that corner of the market. In September the center's policy brief said previous trade battles "demonstrate that once trade market share is lost, it is difficult for markets to return to the previous relationships. Exporting nations dominating markets in terms of price-setting behavior face more competition as new exporters show they're able to meet supplies once the purview of the dominant nation. Trade flows adjust to avoid tariffs, embargoes and other trade-distorting policies. Countries outside the disputes gain market share as their products displace others that face trade barriers. "e loss of market share and the result- ing loss of farm income is a major concern for U.S. agriculture given the current trade disruptions." And the researchers said there's no model or forecast that can project what the market would look like if the U.S. wasn't the dominant trader. — Joy Kopcha Why the U.S.-China trade deal matters TRADE DISRUPTIONS WILL COST IOWA AT LEAST $1 BILLION ©GETTYIMAGES.COM/FOTOKOSTIC Some of America's hold on the Chinese market comes from China's lack of capacity to grow enough of what it needs. An average Chinese farm is 2 acres; in America, an average farm is more than 400 acres.

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