China, Tariffs, And The Hogs Of War The tariffs China just imposed on 128 American-made items will cost the U.S. about 3 billion dollars a year. That's not much to the nation, but it's a big deal if you make one of the products on the list.
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China, Tariffs, And The Hogs Of War

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China, Tariffs, And The Hogs Of War

China, Tariffs, And The Hogs Of War

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CARDIFF GARCIA, HOST:

This morning, China released a list of U.S. imports that it is going to start taxing. And these tariffs are in response to taxes that President Trump put on imports of Chinese steel and aluminum last month.

STACEY VANEK SMITH, HOST:

The list is long. It includes things like unshelled walnuts, avocados, lemons, fresh watermelon, stainless steel pipes, fresh or cold pork - 128 things in all. This is THE INDICATOR. I'm Stacey Vanek Smith.

GARCIA: And I'm Cardiff Garcia. Today's indicator is 3 billion, as in $3 billion. That's the value of U.S. exports on China's new tariff list.

VANEK SMITH: The total value of our exports to China is roughly $135 billion, so penalizing $3 billion worth of U.S. goods might sound small.

GARCIA: But if you're a business that does sell to China and the products you sell are going to be hit by these tariffs, the impact actually could be kind of extreme.

BRIAN DUNCAN: Those variety meats and organ meats and offal and things that we don't consume here, China's a very valuable market for us.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

VANEK SMITH: Chad Bown is a senior fellow at the Peterson Institute for International Economics. He says when he first looked at the list of import tariffs from China, the $3 billion value really stood out to him.

GARCIA: Because $3 billion was roughly the value of the exports from China that the Trump administration had just taxed.

CHAD BOWN: And that's important because what China is trying to do here is they're retaliating proportionately. So they figured out, you know, the United States, the Trump administration with their tariffs on steel and aluminum, they hit about $3 billion worth of Chinese exports. So in return they're going to hit $3 billion worth of U.S. exports.

VANEK SMITH: It's a little bit of an eye-for-an-eye type of thing.

BOWN: It is exactly an eye for an eye - one eye for one eye.

VANEK SMITH: So China didn't go into extreme revenge mode and put tariffs on billions and billions and billions of dollars on U.S. goods. But it also didn't back down. Chad says China seems to be sending the message that it will respond in kind to any tariff actions from the U.S.

GARCIA: And the specific things that China chose to put tariffs on is also interesting, Chad says. There are a lot of agricultural products on this list. And it's going to be hard on the rural economy, the rural American economy, which is a major part of Trump's political base. China knows this.

VANEK SMITH: How many hogs do you have?

DUNCAN: We'll sell about 70,000 head a year.

VANEK SMITH: That's a lot of - that's a lot of pig.

DUNCAN: Small. I'm a small producer in today's marketplace.

VANEK SMITH: Brian Duncan is a hog farmer in Illinois. It's his family's business. His dad raised hogs, too.

Is there something about hogs that people don't know that you know from working with them so many years?

DUNCAN: If they had opposable thumbs, they'd run the world.

VANEK SMITH: (Laughter).

DUNCAN: They are smart and mischievous.

GARCIA: Is that all that's keeping us in charge...

VANEK SMITH: (Laughter).

GARCIA: ...Of the world?

VANEK SMITH: It would appear our opposable thumbs, yes, are quite powerful (laughter).

GARCIA: That's the decisive difference.

VANEK SMITH: Yes. You cannot sign a tariff paper without opposable thumbs. Brian says everyone he knows has been obsessively watching the news to see how China would respond to the Trump administration's steel and aluminum tariffs.

DUNCAN: We in agriculture know we will be the first targets for retaliation. Take a look at what China hit today - fruit, wine and pork. And so I'd say worst fears realized.

GARCIA: Brian says that historically, farmers lose out in a trade war. And in the case of pork, he says, this is especially true. More than a quarter of U.S. pork is exported. And Brian says that China is a particularly important customer because China buys parts of the pig that American consumers don't usually want - so-called variety cuts.

DUNCAN: Ears, tails, hooves - those variety meats and organ meats and offal and things that we don't consume here. China is a very valuable market for us that actually provides value to a product that maybe was going in the dumpster.

VANEK SMITH: You can actually see some of these variety cuts on China's tariff list today. There is a 25 percent tariff on frozen pork liver, on boned pig forelegs, on frozen whole head.

GARCIA: Pig's head?

VANEK SMITH: I think it's a head. I think it's a big head - a whole head. And pork prices have been dropping on this news. Brian says he's done the calculations and estimates that, as of this morning, his pigs have lost about 10 percent of their value.

GARCIA: And for Brian, the timing was terrible. A couple of years ago, he made some big investments in his operation in part because it looked like global trade was actually going to expand. And he noticed that the Trans-Pacific Partnership trade agreement was something that might happen. He built more facilities for his pigs - and so did a lot of the farmers that he knows. Pork is, after all, a big seller in Asia. And it just seemed like American farmers might be able to soon cash in on more open trade.

VANEK SMITH: But now it looks like things are going in the other direction. And Brian says protectionism could be disastrous in his corner of the economy because if people start getting careful - buying fewer pigs, building fewer buildings - there is going to be a ripple effect.

DUNCAN: All of a sudden, the concrete guys, they don't have work this summer. The people making the steel for the buildings, they're not - those buildings aren't going in. And it's just a ripple effect through the rural economy. And I cannot understand how smart people in power don't get that - that if you just fire from the hip, it scares the crap out of everybody.

VANEK SMITH: And that's the real danger here, says Chad Bown - escalation. The Trump administration steel and aluminum tariffs were worth about $3 billion. And China matched it.

GARCIA: So Chad says everyone is waiting to see whether President Trump will make good on the $60 billion worth of tariffs that he's now threatening to impose on Chinese imports. These are $60 billion worth of additional tariffs. Chad says that lead to some serious retaliation. China might start, for instance, taxing Boeing airplanes that we sell to the Chinese or U.S. soybeans. And that would really have a much deeper impact on the U.S. economy.

BOWN: China putting more tariffs on U.S. exports, you know, hurts even more Americans. It's going to hurt more farmers. It's going to hurt more American companies that are trying to sell their goods into the Chinese market. It's going to make them lose sales. It's going to hurt U.S. workers that worked for those companies that are no longer going to be able to sell profitably into China. And so it's going to be a bigger negative impact on the U.S. economy.

VANEK SMITH: You sound a little worried.

BOWN: I'm very worried.

VANEK SMITH: Are you?

BOWN: Yeah.

(SOUNDBITE OF DROP ELECTRIC SONG, "WAKING UP TO THE FIRE")

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