Steel tariff plan backfires on US farmers

Kane County (Illinois, US): Lucas Strom, who runs a century-old family farm in rural Illinois, canceled an order to buy a new $71,000 grain storage bin last month — after the seller raised the price 5 per cent in a day.

The reason: steel prices jumped right after US President Donald Trump announced tariffs.

Throughout US farm country, where Trump has enjoyed strong support, tariffs on steel and aluminum imports are boosting costs for equipment and infrastructure and causing some farmers and agricultural firms to scrap purchases and expansion plans, according to Reuters’ interviews with farmers, manufacturers, construction firms and food shippers.

The impact of rising steel prices on agriculture illustrates the unintended and unpredictable consequences of aggressive protectionism in a global economy. And the blow comes as farmers fear a more direct hit from retaliatory tariffs threatened by China on crops such as sorghum and soybeans, the most valuable US agricultural export.

A&P Grain Systems in Maple Park, Illinois — the seller of the storage bin Strom wanted to buy with a neighboring farmer — raised its price two days after Trump announced aluminum and steel tariffs on March 1 to protect US producers of the metals. Strom and his neighbor backed out.

“Would that price destroy us? No,” Strom said. “But these days, you have to be smart about your expenses.”

The metals tariffs also hitting makers and sellers of farm equipment, from smaller firms like A&P Grain to global giants such as Deere & Co and Caterpillar. Such firms are struggling with whether and how to pass along their higher raw materials costs to farmers who are already reeling from low commodity prices amid a global grains glut.

The world’s two largest economies have threatened each other with tariffs on tens of billions of dollars of goods recent weeks.

Trump imposed tariffs of 25 percent on steel and 10 percent on aluminum in a move mainly aimed at curbing imports from China. He has since temporarily excluded the EU and six other allies from the duties and given them until May 1 to negotiate permanent exemptions.

A&P Grain President Dave Altepeter said the steel used in their bins is made in the United States, but domestic steel prices also have soared because of the tariffs.

The metals tariffs also hitting makers and sellers of farm equipment. Such firms are struggling with whether and how to pass along their higher raw materials costs to farmers who are already reeling from low commodity prices amid a global grains glut.