Impact of COVID-19 on Agriculture

U.S. Soybeans, Cotton, Beef on China’s Most Recent Tariff Target List

News / FBNews April 6, 2018

Farmers and ranchers are well-aware markets ebb and flow, but the tariff tit-for-tat between the U.S. and China is testing both the patience and optimism of families who are facing the worst agricultural economy in 16 years, cautioned American Farm Bureau Federation President Zippy Duvall.

“Growing trade disputes have placed farmers and ranchers in a precarious position. We have bills to pay and debts we must settle, and cannot afford to lose any market, much less one as important as China’s. We urge the United States and China to return to negotiations and produce an agreement that serves the interests of the world’s two largest economies,” Duvall said in a statement.

Earlier this week, China unveiled a list of 106 imports from the U.S.—including soybeans, cotton and beef—that will be subject to a 25 percent tariff. Thirty percent of U.S. soybeans—about $14 billion worth per year—go to China, making soybeans the United States’ top ag export to China. Cotton is our No. 2 export to China, with one out of five exported bales headed there.

China’s announcement came in response to a Trump administration proposal that would impose 25 percent tariffs on imports of about 1,300 Chinese product lines valued at $50 billion. And only yesterday, Trump asked the U.S. Trade Representative to consider an additional $100 billion in tariffs against China.

Trump’s tariff proposal that prompted China to target U.S. soybeans, cotton and beef would not take effect until after a comment period that closes on May 11, and then up to 180 days will be allowed for a final decision by the administration—time when negotiations with China could result in a deal to avert the tariffs. Similarly, the most recent batch of tariffs announced by China has no set start date.

Already in effect are tariffs of 25 percent and 10 percent on imports to the U.S. of steel and aluminum, respectively. While these tariffs apply to several countries from which the U.S. imports those products, it’s notable that China is the largest global producer of steel and aluminum. And while not much steel comes into the U.S. from China, it does export a significant amount of aluminum to the U.S.

China responded to the U.S. steel and aluminum tariffs with tariffs on imports of 128 U.S. product lines.  According to a recent Market Intel, of those 128, 94 are agricultural in nature; the remainder are steel and aluminum. The agricultural lines are divided into two categories – 86 products that will be subject to an additional 15 percent tariff and eight products that will be subject to an additional 25 percent tariff.

“It is important to keep in mind these new tariffs are in addition to existing tariffs. For example, a Chinese importer of U.S. frozen pork had been paying a tariff of 12 percent before April 2; now she will pay a tariff of 37 percent on the same U.S. product, while competing against frozen pork products from our European Union, Canadian, Brazilian, Chilean and other international competitors subject to the regular 12 percent tariff,” Veronica Nigh, AFBF economist explains in the Market Intel update. “It doesn’t take much of a math or economic background to appreciate that the U.S. competitive position will quickly deteriorate in these conditions.”

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