A new trade war with China would come at a steep cost to US producers while benefiting Brazil and Argentina, according to a new economic study commissioned by American corn and soybean growers.
Conducted by the World Agricultural Economic and Environmental Services, the study shows a trade war would result in an immediate drop in corn and soy exports to the tune of hundreds of millions of tonnes. Competitors Brazil and Argentina would claim the lost market share, “which would be extremely difficult for American growers to reclaim in the future.”
The third-party study comes as US lawmakers and officials from both political parties are increasingly looking at tariff-forward approaches as they work to address troubling Chinese trade practices, said a release from the National Corn Growers Association (NCGA).
If China were to cancel its current waiver from the Phase I agreement – a trade agreement signed between the US and China in January 2020 - and revert to tariffs already on the books, US soybean exports to China would plummet 14 million to 16 million tonnes annually, an average decline of almost 52% from baseline levels expected for those years, the study shows
Further, US corn exports to China would fall about 2.2 million tonnes annually, an average decline of more than 84% from the baseline expectation.
While it is possible to divert exports to other nations, the study found there is insufficient demand from the rest of the world to offset the major loss of soybean exports to China to support the farmgate value.
Not surprisingly, the study also confirmed a trade war would lead to a steep drop in soy and corn prices, which would also negatively impact Canadian producers.
“This work shows that a trade war would easily compound the adverse conditions that are placing financial stress on farmers,” said American Soybean Association chief economist Scott Gerlt. “Even when a trade war officially ends, the loss of market share can be permanent.”
According to a report from the USDA, US agricultural export losses from the first US-China trade war under then-American president Donald Trump during 2018 through the end of 2019 totaled more than $27 billion. Soybeans accounted for nearly 71% ($9.4 billion of annualized losses) of the share of estimated trade damages.
