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Potential U.S.-China Trade War Could Cost U.S. Farmers Billions

China 21.10.2024
Source: DairyNews.today
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A new economic study has revealed that a potential tariff-driven U.S.-China trade war could significantly impact American farmers, with U.S. corn and soybean growers facing billions of dollars in lost annual production value.
Potential U.S.-China Trade War Could Cost U.S. Farmers Billions
The study, commissioned by the American Soybean Association and the National Corn Growers Association, was conducted by the World Agricultural Economic and Environmental Services (WAEES) and highlights the severe economic consequences for the U.S. agricultural sector, particularly in rural areas.

The findings indicate that U.S. soybean farmers could lose between $3.6 billion and $5.9 billion in annual production value, while corn farmers may face losses ranging from $0.9 billion to $1.4 billion. The economic ripple effect would extend beyond farmers to industries reliant on agriculture, including crop protection, fertilizer manufacturing, energy, real estate, and transportation. The overall economic contribution of soybean and corn production could drop by as much as $7.9 billion annually.

Crop Price Declines and Trade Disruptions
In addition to lost production value, the study predicts a substantial decline in crop prices. Soybean prices could fall by as much as $1 per bushel below baseline forecasts through 2036, while corn prices could drop by up to $0.13 per bushel. Joe Janzen, a professor at the Illinois Center for the Economics of Sustainability, underscored the negative impact on U.S. agriculture, especially for corn and soybean farms, which are heavily dependent on international trade.

Recap of 2018-2019 Trade War Losses
The study also revisits the 2018-2019 trade war between the U.S. and China, which led to a $27 billion loss in agricultural exports. In response, the U.S. government provided $23 billion in subsidies to farmers through the Market Facilitation Program. While China made record purchases of $59.2 billion in U.S. agricultural goods between 2020 and 2021, these still fell short of the $80 billion commitment under the Phase I trade agreement.

Currently, U.S. agricultural exports to China benefit from tariff waivers that lower rates on key products like soybeans and corn. For example, the tariff on raw soybeans stands at 30.5%, but it is reduced to 3% under the waiver. However, should China cancel its waiver, U.S. soybean and corn exports to China could experience a sharp decline.

U.S. Exports to China Could Plummet, Brazil Set to Gain
The study forecasts that if China reverts to its pre-waiver tariff structure, U.S. soybean exports to China could fall by 51.8%, or 14-16 million metric tons annually. U.S. corn exports could face an even steeper decline, with volumes dropping by 84.3%, or 2.2 million metric tons annually. Under the most extreme scenario, a 60% retaliatory tariff could lead to an even more drastic reduction of U.S. exports, with soybeans potentially dropping by over 25 million metric tons and corn exports by nearly 90%.

As U.S. exports fall, South America, particularly Brazil and Argentina, stands to gain. The study suggests that Brazilian and Argentine farmers would increase their production and capture a larger share of the global market. Chinese tariffs targeting U.S. soybeans and corn, but sparing South American crops, would encourage rapid expansion of agricultural land in Brazil, further shifting the balance of trade.

Strategic Implications
The potential for a new U.S.-China trade war would not only strain the U.S. agricultural sector but also provide a significant advantage to South American competitors. As Brazil and Argentina increase their market share, U.S. producers could face long-term difficulties in reclaiming their global standing, underscoring the importance of stable trade relations with China for the future of American agriculture.

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