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Soybean farmers are still targeted by Chinese tariffs 4 years later

by WOOWinvest
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Soybean farmers are still targeted by Chinese tariffs 4 years later


President Joe Biden has opted to keep the U.S. tariffs his predecessor imposed on $350 billion in Chinese goods in 2018. In turn, Beijing has lifted retaliatory tariffs on some agricultural products, including soybeans, and some U.S.-made goods.

Chinese tariffs hurt U.S. farmers by making U.S.-grown soybeans more expensive for Chinese buyers, who bought most of U.S. exports before the trade war.

“We’ve put up with tariffs for a long time, and that’s how we do business now,” said Dave Walton, an Iowa farmer who saw his soybean prices plummet after the tariffs were imposed in 2018.

His farm is near the Mississippi River, where his soybeans are typically loaded onto a barge and shipped overseas after reaching the Gulf of Mexico. This location makes his crop easy to export.

But this year, Walton is trying to reduce its reliance on foreign buyers. Instead of exporting his soybeans, he sold them to a domestic company that would use the crop for seed.

Walton remains disappointed that the Biden administration has retained U.S. tariffs. Beijing could also raise tariffs on U.S. soybeans if trade tensions ease. He is also frustrated by the administration’s so far unsuccessful appointments to two key agricultural trade positions: the chief agricultural negotiator at the Office of the US Trade Representative and the USDA’s undersecretary for foreign trade, which remain open.

“It showed me that trade is not a priority for the government. If it was their priority, they would fill these trade positions and they would work to renew trade agreements with China and other countries,” he said.

Biden retains tariffs

Earlier this month, the Biden administration took the first step toward a four-year statutory review of U.S. tariffs on Chinese goods — but officials have not indicated that the review will lead to the removal of tariffs.
So far, the Biden administration has resisted pressure from the U.S. business community to raise tariffs, which increase with inflation. In an interview at the Milken Institute Global Conference last Monday, U.S. Trade Representative Katherine Tai said all the tools to combat inflation were on the table, but did not say whether higher tariffs should be one of them.

In 2020, Trump and Chinese President Xi Jinping reached a ceasefire agreement. Both sides stopped adding new tariffs as part of the Phase 1 deal. Beijing also agreed to increase purchases of U.S. goods and agricultural products.

But China has fallen far short of its target, buying only 57% of the U.S. exports it has pledged to buy by the end of 2021. While agricultural exports to China returned to 2017 levels, they fell short of China’s commitments. Soybean exports fell more than 30 percent from the target.

Biden said earlier this year that China’s failure to live up to its promises was the reason he kept the tariffs.

“It’s uncertain,” the president said in January when asked if it was time to start rolling back some of the tariffs.

“I’d love to be in a position where I can say they’re delivering on their commitments or more and be able to unwind some of those commitments. But we’re not there yet,” he added.

Impact on U.S. soybeans

Immediately after China imposed tariffs in 2018, U.S. soybean exports fell sharply. Between 2018 and 2019, soybean exports to China lost more than 75 percent of their value, according to a U.S. Department of Agriculture report.

But soybean sales to China have almost recovered to pre-trade war levels. The USDA report found that in the year following the signing of the Phase 1 deal, soybean exports to China were only 1% lower than in 2017.

Still, without tariffs, it’s hard to know what would happen.

“Since the ceasefire, the overall impact of tariffs on trade is a much harder thing to address,” said Joseph Glauber, a senior fellow at the International Food Policy Research Institute and former chief economist at the U.S. Department of Agriculture.

However, he believes the U.S. will remove the tariffs “with little effort”. “This will help normalize trade,” Glauber added.

Some farmers worry they may permanently lose some Chinese buyers who have turned to other countries for soybeans over the past four years.

As U.S. exports to China increased following the Phase 1 deal, exports from other countries grew faster. As a result, the U.S. market share of Chinese agricultural imports is now smaller than it was before the trade war: roughly 17 percent in the first year of the first phase, compared with 20 percent in calendar year 2017, according to the USDA.

China also imposes non-tariff barriers to trade. Chinese commercial buyers need government approval to import U.S. soybeans.

“Importers in China have to jump over hurdles to get U.S. soybeans. Obviously, doing business has a cost,” Glauber said.

But trade concerns have given way to other, more pressing concerns for farmers, according to the Purdue/CME Group Agricultural Economics Barometer. In April, 42% of producers said higher input costs were their top concern.

While Walton remains frustrated by the Biden administration’s lack of action on trade, he also said he’s concerned about rising costs, especially for herbicides.

“I’ve seen examples where the price of herbicides quadrupled or tripled. … We didn’t get a first choice, but we finally found a herbicide that could be used to protect crops,” Walton said.

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