Source: Oleoscope (Russia)
A new economic study by the World Agricultural Economics and Environment Service suggests that U.S. corn and soybean farmers could lose billions of dollars annually due to tariffs in the event of a new trade war between the U.S. and China, AgriMarketing reports.
According to the study, U.S. soybean farmers could lose an average of $3.6 billion to $5.9 billion per year, while corn farmers could lose an average of $0.9 billion to $1.4 billion per year, depending on how China responds to U.S. tariff increases.
The authors of the study note that this will have a negative impact not only on U.S. farmers, but on the entire U.S. economy, especially rural areas. The overall economic contribution of soybean and corn production could decline by $4.9 to $7.9 billion per year, with related industries such as crop protection, fertilizers, energy production and generation, and real estate and transportation being the hardest hit.
In addition, the study predicts a sharp decline in the value of agricultural products in the United States. According to the forecast, soybean prices could fall by $0.60 to $1.00 per bushel and corn prices could fall by an average of $0.08 to $0.13 per bushel below the baseline forecast by 2036.
Chris Clayton of The Progressive Farmer said the study looks at the trade war with China in 2018 and 2019, which resulted in a $27 billion loss in agricultural exports during that period. In response, President Trump’s administration provided $23 billion in special subsidies to farmers through the Commodity Credit Corp. as part of a market promotion program. Following the trade war, China responded with record purchases totaling $59.2 billion over two years (2020-2021), but still fell short of its pledge of $80 billion.
“China is still imposing tariffs on a wide range of agricultural products from the U.S., but farmers are selling them to China at a preferential rate, so the tariff is not going up,” Clayton reported. “For example, raw soybeans are subject to a 30.5 percent tariff, which has now been reduced to 3 percent. Corn is subject to a 26% tariff, unless it falls under a quota for which the preferential tariff is 1%.”
The study assumes that US soybean exports to China would decline by 14 to 16 million tons per year, an average of 51.8% of projected levels for this year, if China were to remove its current waiver (from the 2020 Phase I agreement) and revert to the tariffs already in place. Corn exports from the US to China would fall by around 2.2 million tons per year, an average of 84.3% of expected levels.
The study found that any retaliatory tariffs imposed by the US would be costly for US producers, but would benefit Brazil and Argentina. In the event of a Chinese response to the US tariffs, Brazil and Argentina would increase their exports and thus gain valuable global market share. Chinese tariffs on US soybeans and corn will be an incentive for Brazilian farmers to expand production areas even faster than planned.