New trade war would slash U.S. exports: report

Grain and oilseed prices would fall if a new trade war erupted between the United States and China, according to a new report.

The American Soybean Association and National Corn Growers Association sponsored the report prepared by World Agricultural Economic and Environmental Services.

The groups said there has been “considerable discussion” about ratcheting up tariffs on U.S. imports of Chinese products.

Former U.S. President Donald Trump has publicly stated on the campaign trail that he would impose a 10 to 20 per cent across-the-board tariff on all imports into the U.S., as well as an additional 60 per cent tariff on all imports from China.

Trump was the architect of the 2018 trade war with China that resulted in US$27 billion in lost U.S. agricultural exports through the end of 2019.

The war came to an end when China and the U.S. signed a Phase 1 Agreement in January 2020, in which China pledged to buy $80 billion of U.S. agricultural products in 2020 and 2021.

The country fell well short of its pledge, buying $59.2 billion over the two-year period of the agreement.

Many of the tariffs China imposed on U.S. agricultural products during the 2018 trade war remain in place, according to the study.

However, China has granted a tariff waiver that has been renewed annually since the Phase 1 Agreement was signed.

“These tariffs could easily be reinstated by China,” the associations said in an article about the new economic study.

The study determined that if China cancels the current waiver and reverts to tariffs already on the books, it would have a profound effect on U.S. exports.

Soybean exports to China would fall 14 to 16 million tonnes annually, an average decline of 51.8 percent from baseline levels expected for those years.

Corn exports would drop by 2.2 million tonnes annually, a decline of 84.3 percent.

“Brazil and Argentina would increase exports and thus gain valuable global market share,” the associations stated in a news release.

The study found that there would be insufficient demand from other markets to make up for the lost sales.

“A new trade war would lead to a steep drop in soy and corn prices, resulting in a ripple impact across the U.S.,” the news release stated.

U.S. soybean prices would fall by an estimated 60 cents per bushel below the baseline forecast, while corn prices would drop eight cents per bu.

If China retaliated with a 60 per cent tariff on U.S. agricultural imports, the impact would be more significant.

That would result in an estimated loss of more than 25 million tonnes of U.S. soybean exports and nearly 90 per cent of its corn sales to China.

Under that scenario, U.S. soybean prices would fall nearly $1 per bu. on average, while the price of corn would drop by 13 cents.

MarketsFarm analyst Bruce Burnett said Canadian grain and oilseed prices are closely tied to U.S. values.

“Everything down there impacts us to some extent,” he said.

Canola would be the crop most directly affected, since it is heavily influenced by U.S. soybean prices.

Lower U.S. corn prices would adversely affect Canadian corn, wheat and barley values, although an eight cent per bu. drop doesn’t seem that much given today’s price volatility, he said.

He feels the same way about the estimated 60 cent per bu. drop in soybean prices.

“That sounds conservative to me,” said Burnett.

Some Canadian crops might fare well under a U.S.-China trade war.

“Back when we had the previous Trump trade war, it actually benefitted Canadian soybean exports and exporters because we shipped a lot more beans to China,” he said.

However, for the most part it would be a net negative for Canadian growers and is something they should consider in their marketing plans for 2024-25.

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Tags: prices, Oilseed, United States, soybeans, agricultural products, imports, tariffs, trade war, China, corn, grain