Industry News: Trump Plans to Raise Tariffs on Chinese Imports Again; U.S.-China Trade Dispute Impacts Global Agriculture

Release Date:

2019-05-13

U.S. President Trump has recently sought to further raise import tariffs on Chinese goods. This could be another strategy aimed at pressuring the Chinese government to swiftly reach a trade agreement, thereby narrowing the U.S.-China trade deficit. If this approach backfires, the agricultural sector could bear the brunt of the impact. Dr. Bob Fairclough, an expert with the Kleffmann Group and Chief Advisor at AgriGlobe, offers a clear and concise assessment of the market situation: 1. What would be the impact on U.S. agriculture if the United States raised tariffs on Chinese imports? U.S. farmers would first face challenges on two fronts. Right here in the United States…

U.S. President Donald Trump has recently sought to further raise tariffs on Chinese imports. This move may be another tactic aimed at pressuring the Chinese government to reach a trade agreement more quickly, thereby narrowing the U.S.-China trade deficit. Should this strategy backfire, the agricultural sector could bear a particularly heavy burden.

Dr. Bob Fairclough, an expert at the Kleffmann Group and Chief Consultant at AgriGlobe, offered a straightforward assessment of the market situation:

1. If the United States raises import tariffs on Chinese goods, what impact will this have on U.S. agriculture?

U.S. farmers will first face challenges on two fronts. Just as the U.S. Corn Belt is beginning to feel the effects of drought and growers are preparing for planting, they may now be forced to reduce the acreage devoted to soybeans. In a typical marketing year, China accounts for a substantial share of U.S. soybean exports—60% of the total in 2017—and with this key export market once again under threat, U.S. farmers are likely to proceed with caution when expanding soybean acreage. Even before this development, the situation was far from smooth: despite China’s renewed commitments to purchase U.S. soybeans, shipment volumes have been extremely slow. Whether or not this scenario unfolds, U.S. farmers are expected to favor corn over soybeans; however, it remains uncertain whether this shift will result in more planted acreage than currently projected. The second factor weighing on U.S. farmers is a sharp rise in the prices of crop protection products, as the additional import tariffs imposed on all raw materials, active‑ingredient intermediates, and finished plant‑protection products originating in China will ultimately be passed on to producers.

2. What impact will this have on Chinese agriculture?

Like U.S. growers, Chinese farmers will be affected on two fronts. China’s “Blue Sky Plan,” implemented since 2018, has driven up the prices of crop protection products and led to shortages of certain inputs. Tariffs imposed on exports to the United States will only exacerbate this trend. More importantly, in recent years China has relied heavily on soybean imports from the United States; an escalation of the trade war will place additional pressure on domestic producers. From another perspective, however, this situation also presents an opportunity. While China may not be the ideal location for soybean cultivation—certainly not in terms of production efficiency—this shift in focus could impose further strain on farmers growing staple crops such as rice, cereals, and corn. Meanwhile, the outbreak of African swine fever reduced China’s pig herd by roughly 20% in 2018/19. Although this helped ease last year’s supply pressures, once pig numbers rebound, a shortage of feed-grade soybeans is likely to emerge—and with it, China’s growing demand for pork will once again come into sharp relief.

3. What impact does it have on global agriculture?

The patterns of trade are set to undergo significant changes. China continues to import U.S. soybeans, but now does so via Argentina, purchasing finished soybean oil instead. This, in turn, puts pressure on Argentine farmers. Meanwhile, the European Union is facing a surge of dumped soybean oil imports, further straining EU rapeseed producers already under duress. As the United States seeks new markets such as Pakistan, this could exert additional pressure on India–U.S. relations and on India’s “Make in India” policy. In Russia’s Far East, soybean growers—already enjoying robust growth—are reaping extra benefits; yet this development risks undermining wheat producers in core growing regions, curtailing export potential and, in turn, creating renewed opportunities for French wheat in the global market. The list of such scenarios is endless.

Source: AgroPages (World Agrochemical Network)

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