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Exports vs tariffs

Chinese tariffs on U.S. grain could cut into exports at the Port of Longview.

Lucrative grain export terminals at local ports could become some of the latest casualties in the Trump administration’s escalating trade tiff with China.

Revenues at the ports in Longview and Kalama are closely tied to grain, and the ports would undoubtedly feel the sting of steep Chinese tariffs on U.S. grain exports.

Beijing proposed a 25 percent tariff on 106 U.S. products — including wheat, soybeans and corn — late last month in response to President Donald Trump’s plan to impose tariffs on Chinese technology products.

Trump campaigned on the promise of reducing the United States’ trade deficit with China to protect American jobs. Overall, the U.S. trade deficit with China increased by 12.6 percent to $568.4 billion in 2017, marking the largest trade gap in a decade.

As one of the most trade-dependent states in the nation, however, Washington could lose billions in a trade war. The state exported more than $18 billion in goods to China last year, with airplanes and wheat among the top exports, according to U.S. trade data.

While a final decision on China’s grain tariffs is not expected until mid-May, some U.S. grain producers have already been hit with crippling border taxes.

China’s ministry of commerce announced Tuesday that grain handlers would have to put up a 179 percent deposit on the value of U.S. sorghum imports, according to the Reuters news agency. Sorghum is used to feed livestock and poultry, and it is also used to make ethanol. The new taxes are the result of a Chinese anti-dumping investigation launched in February, which is widely seen as a response to Trump’s proposed tariffs on Chinese goods.

The duties have already caused several ships carrying sorghum from the United States to change course because their cargo was no longer profitable at Chinese ports, the wire service reported. The United States exported about $1 billion in sorghum to China last year, according to the U.S. Grains Council.

“For their overall trade businesses, this is not that substantial. But it’s a warning,” Bill Densmore, senior director of corporate ratings at Fitch Ratings, told Reuters. “If China really does start slapping tariffs on everything, like soybeans and corn, things could get really ugly, really fast.”

It’s still unclear how broadly Chinese tariffs on U.S. grain products would affect grain terminal operations at the ports in Longview and Kalama, but any decline in grain shipments would cut into both ports’ bottom lines. Export Grain Terminals in Longview, Kalama Export Co., and the Temco grain elevator south of Kalama generate millions in revenue annually. United Grain Corp. also operates the largest grain elevator on the West Coast at the Port of Vancouver, and exports soybeans almost exclusively to China, according to The Columbian.

In addition to leasing land to the grain terminal operators, the ports also collect hefty docking and wharfage fees when ships bound for Asia stop to load up with grain.

Wheat, soy and corn exports at the Port of Longview have increased from about 5.6 million tons in 2013 to 7.8 million tons in 2017 — a 40 percent jump. Grain exports now account for 76 percent of the port’s total tonnage, according to port data. Out of 307 total vessel calls at the Port of Longview last year, nearly half were grain-related.

At the Port of Kalama, grain exports have grown from about 10 million tons in 2013 to nearly 15 million tons in 2017, a 50 percent increase.

“I’m always concerned with tariffs,” Port of Longview Commissioner Bob Bagaason said Friday in a phone interview.

Bagaason said the port’s revenue has more than doubled since he was first elected commissioner 10 years ago, thanks largely to grain exports. The port’s revenue swelled from $17 million to $40 million during that time, he said.

“There’s no getting around it,” he said. “They have shifted us into high gear as far as revenue.”

Local ports do not appear to track commodity shipments by destination, and goods such as grain can often land at third-party ports before reaching a final destination. So it’s difficult to determine how much grain the terminals ultimately send to China.

Port officials in Longview and Kalama referred interview requests to spokesmen with the grain terminal operators, who declined to comment for this story.

But Chinese tariffs on grain would have a ripple effect throughout the region’s wheat industry, said Glen Squires, president of the Washington Grain Commission. And that could ultimately impact jobs in Cowlitz County.

“It goes from the producer to all of the guys loading the ships,” Squires said. “It’s a wide ripple effect that affects a lot of people.”

Jake Ford, president of the Longview-based International Longshoremen and Warehouse Union 21, also declined to comment.

Washington exported 286,000 tons of soft white wheat to China last year, and the state has already sent 333,000 tons to China this year.

Squires said he visited China in January, where he was told the country is easily capable of purchasing 1 million tons annually.

“It’s growing and that’s certainly a market that we want to be able to sell into, so the tariffs put uncertainty into the market and they make us less competitive,” he said.

Squires noted that the United States is just one of world’s top wheat producers.

At 60 million tons, the U.S. ranked fourth last year in annual wheat production, ahead of countries such as France and Canada and behind China, India and Russia.

“China can go to Canada and buy wheat cheaper than they can from us because they don’t have a tariff, so that’s what they they do,” Squires said. “And then we lose the market.”

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