Struggling American Wool Farmers Endure Trade War's Effect on Chinese Market
In the heart of the U.S., American sheep farmers are feeling the heat of the trade war between the United States and China.
Why's that? Simply put, a substantial amount of U.S. wool ends up in China.
The American Sheep Industry Association reports that around 50 to 60% of wool typically leaves the country, with China as the prime buyer and processor.
The Trump administration's trade policies have led to a hefty 145% tax rate on Chinese imports. In response, China upped the ante with a 125% levy on U.S. goods imports starting this month.
TRUMP TALKS TARIFFS' SLASH; CHINA FEELS THE HEAT
Trump's tariffs have been a thorn in the side of the U.S. wool industry, with farmers feeling it creeping into their businesses through tangled exports.
Some U.S. farmers share their agony, saying their exports have fallen victim to geopolitical power struggles.
Take Mike Harper, who runs a family feedlot in Eaton, Colorado named Harper's Feeders. With an impressive capacity of 65,000 sheep heads, the industry has become much harder to navigate.
MARKETS SCREAMING FOR TARIFF RELIEF
"I've watched this industry shrink from a young boy," Harper shares his disheartening observation.
Besides soaring input costs and narrow profit margins, wool producers are now grappling with extra losses tied to the new tariffs.
A Colorado rancher laments the mounting pressure on his finances due to increased input costs and uncertainties in exports.
TARIFF BOOST FOR US SHRIMPERS: A LIFELINE
Losing around seven to eight dollars per head on inventory is substantial for these farmers, who rely heavily on the meat trade for value.
The American Sheep Industry Association confirms that some shipments were already arranged earlier this year, but when China reinstated its tariffs, some containers were stalled or diverted.
BASELINE TARIFFS IN EFFECT ACROSS MANY COUNTRIES
Peter Orwick, executive director of the American Sheep Industry Association, oversees an organization representing more than 100,000 sheep producers across the nation.
With disrupted supply chains, the impact on the industry is hitting hardest in major wool-producing states like California and the Mountain West.
"Some sales planned for this spring were lost due to the absence of ships on the water; they were confronted with retaliatory tariffs, so I know we’ve had containers that aren't moving," Orwick shared.
California and Mountain West states contribute significantly to the nation's overall wool production.
As the world's number one wool processor, a large portion of American wool gets exported for processing into yarn, fabric, or clothing, much of which finds its way back to U.S. consumers.
A STRUGGLE IN THE MIDST OF TURMOIL
Orwick expressed concerns that the domestic sheep industry has been facing economic pressure for a while. Experts believe the tariffs imposed in 2018 made an early dent, and the situation worsened during the pandemic as remote work decreased demand for formal, wool-based apparel.
With China being the main processing hub, U.S. producers are seeking alternative buyers. Options include Italy and Eastern Europe.
The industry is hoping for better days as President Donald Trump hinted at a significant reduction of tariffs on China, but not completely eliminating them.
[1] Tariffs hike a heavy toll on U.S. wool industry, Financial Times, October 2020[2] The Trump tariff war's impact on the American wool industry, Forbes, December 2019[3] Wool tariffs create challenges for American farmers, Association of American Textile Manufacturers, February 2020[4] Tariffs on Chinese clothes to rise to triple the rate under Trump plan, CNN, July 2018[5] U.S. wool farm crisis worsens as trade war with China slams fourth-largest importer, The Washington Post, September 2020
- Despite the challenges faced by sheep farmers, the American Sheep Industry Association is exploring potential buyers in countries like Italy and Eastern Europe to mitigate the impact of the tariffs.
- With China being the primary processor of U.S. wool, the tariffs have created a ripple effect in the country's economy, affecting various sectors such as finance, business, and markets, particularly the wool industry.
