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How Trump’s trade wars are affecting American farmers

The Trump administration's tariffs against China and Mexico have sparked retaliation by both countries on American agriculture. As a result, dairy producers have experienced a painful drop in demand, but many hope a promised $12 billion bailout will improve business in the long run. Lisa Desjardins speaks to Jim Mulhern, head of the National Milk Producers Federation, for his perspective.

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  • John Yang:

    For months, American farmers have felt the fallout of President Trump's trade war with China. The administration has attempted to ease their pain with a $12 billion aid program.

    But after six months of retaliatory tariffs, many farmers are still feeling the impact.

    Lisa Desjardins takes a look at one of the sectors hit hardest by the trade conflict.

  • Lisa Desjardins:

    For that, I'm joined by Jim Mulhern.

    He's president and CEO of the National Milk Producers Federation.

    Thank you for joining us.

    This Thanksgiving, this week, for many Americans, it's a very happy time. We have got a great, booming economy, stability in a lot of jobs.

    But I'm curious, what is it like for your business, for your farmers?

  • Jim Mulhern:

    Well, at Thanksgiving time, like all families in America, our members are home enjoying this holiday with their families, with mixed blessings, thankful for a good economy overall, but they're not enjoying that as much.

    Dairy farmers are now in their fourth year of poor prices. The last good year we had was 2014. And the last four years have really been difficult. It was starting to look better this year, when some developments in the — on the trade policy front kind of threw a wrench into things and have created some real problems financially for dairy farmers.

  • Lisa Desjardins:

    Essentially — there's obviously many complicated mechanics at work, but, essentially, the president's tariffs have led to retaliatory action…

  • Jim Mulhern:

    Yes.

  • Lisa Desjardins:

    … especially by Mexico and China.

    I saw, for example, Mexico now has a 25 percent tariff on American cheese…

  • Jim Mulhern:

    Right. Right.

  • Lisa Desjardins:

    … coming out.

    So, what is this doing exactly right now for your farmers?

  • Jim Mulhern:

    Well, the tariffs are creating some real problems.

    We were looking at better prices the second half of this year, for the first time in the four-year period of tough top prices. Farmers were looking forward to the second half of 2018 to get back into the kind of prices we need to survive.

    And when the tariffs were announced at the end of May, we saw the futures market, which is used by a lot of farmers to hedge price risk, we saw the futures markets collapse. They dropped a total of $1.8 billion value out of futures markets just for the second half of 2018…

  • Lisa Desjardins:

    Wow.

  • Jim Mulhern:

    … from July to the end of the year.

    And that's recovered slightly, but it's still a $1.5 billion loss that we're — we're seeing in the futures market.

  • Lisa Desjardins:

    Essentially, it's to say that American dairy farmers are selling less of their product overseas now, especially to China. Prices have gone up there, and prices have gone into Mexico.

    So that's left more milk in this country, more supply.

  • Jim Mulhern:

    Yes.

  • Lisa Desjardins:

    And that's meant, for consumers, milk prices have gone down, but to a level that's really a problem for your farmers.

  • Jim Mulhern:

    Well, it is, because we rely upon the export market in an increasingly important role for the U.S. dairy industry.

    We, like much of agriculture in the U.S., are very productive. We produce more milk than we consume in the U.S. So those markets, export markets, are really, really important.

  • Lisa Desjardins:

    So the president has that he's going to help farmers, $12 billion in cash.

    Are your farmers seeing that? It's a short-term fix, a bailout. Is that helping? And some farmers we talk to you say, hey, we think, in the long term, we like what the president is doing.

  • Jim Mulhern:

    Yes.

  • Lisa Desjardins:

    We don't think trade practices are fair.

    How are your farmers doing short-term?

  • Jim Mulhern:

    Well…

  • Lisa Desjardins:

    Are they seeing this bailout?

  • Jim Mulhern:

    Well, to your — to your point, it is a mixed blessing.

    I mean, our — our members, like many farmers, do want to see trade policy improvement in this country. We face a lot of barriers to export our products. Because the U.S. is so productive, many countries erect barriers. And those are problems.

    The issues with China are ones that are, I think, shared by most trade observers, intellectual property theft and the other issues of major concern. But when it comes to the tariff retaliation, we're kind of the victims of this trade war, if you will.

    And it is having a negative impact on us and really all of agriculture.

  • Lisa Desjardins:

    Are they seeing any of this short-term cash the president has…

    (CROSSTALK)

  • Jim Mulhern:

    So, the tariff mitigation package announced by the secretary of agriculture this summer has provided a little bit of relief, but it has come nowhere close to covering the kind of damage that is being done.

    In the package announced so far, the first round of payments was $127 million made available for dairy farmers. That's against a loss of $1.5 billion. So, you can see the magnitude…

  • Lisa Desjardins:

    One-tenth of the loss.

    (CROSSTALK)

  • Jim Mulhern:

    One-tenth of the loss, less than one-tenth of the loss.

    In consumer terms, $127 million on the second half of U.S. — second half of the year's milk production is about a penny a gallon, when farmers are losing 12 cents a gallon. So it really is not covering the losses.

    And so we really are a victim of this trade policy battle that's taking place.

  • Lisa Desjardins:

    How serious do you think this is in the long term? How long can farmers wait out for the president's policies to start to benefit them, if they do?

  • Jim Mulhern:

    Well, there's — there's two issues here.

    One, there's the tariffs on steel and aluminum. And that principally for us is an issue with Mexico. We're hoping those tariffs are lifted as soon as possible. We're hoping that, when the U.S.-Canada-Mexico free trade agreement is announced or signed, that those tariffs will be lifted. That would help us with our most important market.

    The China situation is probably longer-term. And we're concerned about that. That's a big market for us. It has essentially disappeared. We have seen a 55 percent — 53 percent decline in exports to China since the tariffs went into effect.

    So, the longer that goes on, the greater damage. So we are concerned, going into 2019, that we will continue to see damage to dairy exports, especially to China.

  • Lisa Desjardins:

    So many Americans thankful for our farmers, but there's very serious concerns for them right now.

    Thank you for talking to us, Jim Mulhern of the National Milk Producers Federation.

  • Jim Mulhern:

    Thank you.

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