- Washington and Beijing agreed to cease tariff escalations for at least 90 days to try to reach a trade deal.
- Some farmers may have a difficult time returning to pre-tariff conditions – even if a deal is reached.
- One economist estimates that even with tariff rates at zero, soybean farmers would make up about half of market share over the next year.
A cease-fire between the US and China sparked hopes that the world’s largest economies can scrap protectionist policies that have cast uncertainty on the American agriculture sector. But for some farmers, damage from tariffs will outlast the trade war.
In a sideline meeting with Chinese President Xi Jinping on Saturday at the G20 summit in Argentina, President Donald Trump agreed to put off plans to more than double the rate on most tariffs against Beijing to 25% at the beginning of next year.
With China agreeing to buy more agricultural goods from the US – though the amount wasn’t specified – Trump quickly hailed the agreement as a victory for American farmers. Beijing has sought to reduce dependence on American farms as it retaliates against his administration, which imposed a flurry of tariffs on China in attempt to force change to trade practices seen as unfair.
“Farmers will be a a very BIG and FAST beneficiary of our deal with China,” he wrote on Twitter on Monday. “They intend to start purchasing agricultural product immediately. We make the finest and cleanest product in the World, and that is what China wants.”
While orders from China would all but sure pick back up if tariff levels were lowered to previous levels, it isn’t clear to what extent. Trade relationships have shifted. Futures contracts have been locked in. American crops have rotted.
Some farmers may not be able to get back customers they lost in wake of retaliatory duties. To avoid a 25% tax on shipments from American soybean growers, for example, the Chinese have turned to other major producers like Brazil. Soybean exports from the US to China fell 94% through mid-October compared with last year’s harvest, the New York Times reported last month.
Chad E. Hart, an agricultural economist at Iowa State University, estimates soybean farmers could recover around half of market share over the next year if tariffs were lifted immediately. In the long run, he said that could increase to about three quarters.
“We won’t gain back everything we lost,” Hart said. “We sort of lost our window of opportunity in the Chinese market, at least for this growing season. Once you’ve established trade flow and get that shipping all worked out, it’s hard to want to move away from that.”
While the window for the US to fill the Chinese soybean market before Brazilian crops come online dwindles, key details on the framework for an agreement remain hazy.
For instance, there could be a marked difference between what a “very significant” amount of agricultural goods means for each side. For American farmers, Hart said that would mean increasing both government and private purchases. He expects Beijing would only guarantee government purchases, while the rest would depend on price conditions.
Trump has vowed to pursue further escalations if a deal isn’t reached by a 90-day deadline set by his administration, a case that could lead to prolonged trade tensions.
Net soybean exports from the US will fall by nearly a third over the medium term in that case, estimates Wallace E. Tyner, a senior fellow at the National Center for Food and Agricultural Policy who teaches economics at Purdue University. Up to nine million acres of soybean fields could be lost to Brazil, he said.
“The real danger is that in the medium term, Brazil could plant a lot more soybean acreage,” he said. “They’re lower cost producers than we are. Once it’s established and they have the infrastructure in place, that’s a market we’ll lose forever.”
Still, some are just relieved by the possibility conditions might improve. After months of discounted prices and halted shipments, Iowa farmer and American Soybean Association president John Heisdorffer said the agreement was the first positive news for farmers since trade tensions began.
“If this suspension of tariff increases leads to a longer-term agreement, it will be extremely positive for the soy industry,” he said in a statement. “We want to begin repairing damage done to our trade relations with China, which has been essential to successful soybean exports for years.”
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