When Tariffs Hit Home How the trade war with China is playing out on one peanut farm in Georgia.
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When Tariffs Hit Home

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When Tariffs Hit Home

When Tariffs Hit Home

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CARDIFF GARCIA, HOST:

The trade war with China was one of the biggest economic stories of 2018. Import taxes on goods that were sold from China into the U.S. cost American businesses billions of dollars last year. And these tariffs could also be part of why China experienced its lowest level of economic growth in nearly 30 years.

STACEY VANEK SMITH, HOST:

Yeah, because trade is global. When tariffs are put in place between two giant economies like the U.S. and China, the economic impacts ripple all over the world. And the effects can be enormous. But also, tariffs end up affecting a lot of people on a very individual level.

DAVID REED: Hello, I'm David Reed. I'm a peanut, cotton farmer from Dooly County, Ga, Pinehurst. I've farmed here for 50 years.

GARCIA: Peanuts, peanut butter and cotton - these are goods that were all hit by retaliatory tariffs that China put on the U.S. And people like David Reed who sell peanuts to China have been some of the hardest hit because China was one of the biggest buyers of both U.S. cotton and peanuts. This is THE INDICATOR FROM PLANET MONEY. I'm Cardiff Garcia.

VANEK SMITH: And I'm Stacey Vanek Smith. Today on the show, we talk to one farmer about what it's like when you find your livelihood in the crosshairs of a global political storm.

GARCIA: And on top of that, an actual storm, one of the worst storms in decades. And as a result, David and his fellow farmers ended up in this really bizarre and unfortunate situation that appeared to put them outside the normal laws of supply and demand.

REED: '18 was a very unusual year all the way around, from start to finish.

(SOUNDBITE OF MUSIC)

VANEK SMITH: David Reed looks a little like Santa. But with this very neatly trimmed white hair and this tidy little mustache, he had on a blue button-down shirt tucked into his jeans, brown leather belt.

You have peanuts on your belt.

REED: Oh, yeah. Yeah. Peanut Commission's - has these peanut belts.

VANEK SMITH: Those are great.

REED: Just a novelty that we sell.

VANEK SMITH: David has been farming peanuts and cotton on this land for 50 years. His grandfather farmed it before him. It is just this beautiful area, flat and green. Low pine trees and fields stretch out in every direction. But the reason David's family settled here has more to do with what's under the ground, the sandy soil.

REED: It's just good peanut dirt.

GARCIA: Georgia grows more than 40 percent of the nation's peanuts. This area specializes in runner peanuts, which are mostly used to make peanut butter. Jif gets a lot of its peanuts from here. Also, some of the peanuts in your peanut M&M's are from this area.

VANEK SMITH: Which are excellent peanuts.

GARCIA: (Laughter) Yeah, the best.

VANEK SMITH: (Laughter) David Reed farms more than 2,000 acres of peanuts and cotton with his wife, Beverly. And when his crops started coming in last year, he says, it was pretty glorious.

REED: Oh, yeah. We had the best crop we ever had in 50 years. And we were harvesting the best crop of my lifetime.

VANEK SMITH: Of peanuts?

REED: Peanuts and cotton.

VANEK SMITH: And then, starting over the summer, a couple things happened.

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UNIDENTIFIED REPORTER #1: The trade war with China continues to escalate. The Chinese government this morning announcing it's going to impose new tariffs on $16 billion worth of U.S. goods.

GARCIA: Among the U.S. goods that China started taxing were peanut butter and cotton, basically everything they grow in this part of Georgia. And then, a couple of months later, this happened.

(SOUNDBITE OF ARCHIVED RECORDING)

BROOKE BALDWIN: Hi there. I'm Brooke Baldwin, live here in Destin, Fla., where we are covering the official landfall of Hurricane Michael.

UNIDENTIFIED REPORTER #2: You can feel the ferocity. I'm sorry. I'm walking around here very gingerly trying to make sure that there is no flying debris coming my way.

UNIDENTIFIED REPORTER #3: ...Where they're getting sustained Category Four hurricane winds coming in. This is epic.

REED: Me and Beverly got up that morning before daylight. And I was going around with a spotlight, looking at my - looking to see what was left around here and looking at the cotton. And we went in some fields, and it just looked like it was devastated.

GARCIA: David lost about a third of his cotton crop and a couple of fields of peanuts too.

REED: I'll show you where the peanuts - you know.

VANEK SMITH: Oh, it is sandy. This is sandy soil.

REED: This - yeah, it's sandy soil. She'd get on out here. You see the peanuts on the ground there? That's what was left.

VANEK SMITH: Left after the storm. Peanuts grow underground like potatoes, and this field has peanuts all over the dirt. David picked a couple up, but they were rotten from all the water from the storm. The shell was kind of soft, came apart in his hands.

REED: See, that was a good peanut when it came out. But it just somehow - it didn't - we lost some after the storm hit. This was the field that got hurt.

GARCIA: The peanuts and cotton that did survive walked straight out of a storm and into a trade war. U.S.-grown cotton and peanut butter were all hit by tariffs. And China is one of the biggest importers of American peanut butter and cotton, and suddenly China was taxing those imports by as much as 25 percent.

VANEK SMITH: That's a lot.

REED: Yeah. Oh, yeah. That hurts. That hurts.

VANEK SMITH: Well, you've - I imagine - you've said you've been farming for 50 years. You've definitely seen difficult periods before. Have you ever dealt with tariffs before?

REED: No, I've never had to deal with tariffs, you know, as far as affecting us like this has, in my 50 years of farming.

VANEK SMITH: Oh, so this is new.

REED: Yeah. This is all new to me.

GARCIA: China's peanut butter and cotton orders from the U.S. collapsed overnight. And the price that David was getting for his peanuts and cotton both fell by about 30 percent.

VANEK SMITH: So because of the storm, you lost quite a bit of your cotton crop and some of your peanut crop. But then also, because of tariffs, the amount of money that you're getting for the crop that had - that is left was, like, not as high.

REED: See, it hurt both ways.

VANEK SMITH: David and his fellow farmers ended up in this weird situation that put them kind of outside of the typical laws of supply and demand because normally when the supply of something goes down, the price of that product goes up. So there are fewer peanuts in the world because of the storm, but people still want their peanut butter. So the price of peanut butter goes up, and the price that farmers get for their peanuts goes up.

GARCIA: But this was not a normal situation. The storm hit around the same time that the trade war took effect, so U.S.-made peanut butter was suddenly way more expensive for Chinese buyers. So demand from those buyers went down, and the price of peanuts also went down instead of up.

VANEK SMITH: Chinese imports of U.S.-made peanut butter, peanuts and cotton tanked. And what had been shaping up to be one of the best years in David's entire farming career turned into one of the worst years he'd ever seen.

REED: You know, we had planned to make a lot of money this year, but Lord didn't see fit for it. But maybe next year He's going to bless us better. But hopefully we going to break even.

VANEK SMITH: Break even. And David says he is one of the lucky ones.

REED: There's some farmers just worried, you know. I've heard them talk and say that I don't know if I'm going to survive this or not. And, you know, it's heartbreaking.

GARCIA: And David says that the economic effects of the storm and the tariffs haven't just hit the farmers. They've hit the whole area.

REED: It's hurting the whole community and the equipment dealers and the guy down the street with the hardware store. I mean, we're not going to buy and spend money as we did, as freely as we did, because we don't have it. And everybody suffers.

GARCIA: In spite of everything, though, David actually supports the tariffs.

REED: I thought, well, that's not good for the farmer right now. But I think it's the right thing to do, you know, because the trade balance was so unfair, you know? And I think President Trump done the right thing, in my opinion. I think he did a good thing. It hurt us right now. But I think, in the long run, it'll help us.

VANEK SMITH: David thinks the macroeconomic issues between the U.S. and China are important enough that the sacrifice feels worth it to him. He says most of the farmers he's talked to feel the same way.

GARCIA: Now, the government is providing millions of dollars in aid to cotton farmers and supplementing a lot of the peanut losses. But David says it doesn't make up for everything. It doesn't make up for all the losses.

Also, nobody knows how long the tariffs will continue. And while they're going on, China could just lock down peanut and cotton supplies from other parts of the world. So even if the trade war ends soon, the Chinese market for U.S. peanuts and peanut butter and cotton might never come back to where it was before.

But David says he is not going to switch to another crop. Neither's anybody he knows. They're going to continue growing cotton and peanuts just like always.

VANEK SMITH: Why is that?

REED: It's in their blood. You know, it's what they've always done. And peanuts is a good crop to grow, you know, and there's usually money in them if you make a good yield. And I just like to see them grow. I enjoy seeing good peanuts. It just does something to your heart.

(SOUNDBITE OF MUSIC)

VANEK SMITH: Special thanks to Beverly Reed and Joy Carter Crosby. THE INDICATOR is produced by Darius Rafieyan, edited by Paddy Hirsch. Our intern is Willa Rubin. And we are a production of NPR.

(SOUNDBITE OF MUSIC)

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