As a trade war with China ramps up, America's $14 billion soybean trade with the Asian nation is the latest area to be at risk. The Chinese government, responding to President Trump's announcement of planned tariffs on more than 1,300 Chinese products, has revealed plans to target soy for a 25% tariff. What many Americans may not realize, however, is that China is a major trade partner for the booming U.S. soybean export business; the country currently buys about half of the U.S. soybean exports. A report by CNBC suggests that the impact of new tariffs in this area could be devastating, particularly for so-called "Trump country."
$20 Billion in Agricultural Exports Annually
U.S. agricultural producers export about $20 billion worth of products to China each year, the majority of which is soy. Other agricultural exports to China include cotton, wheat, and corn. The thought of an expanded trade war has potentially significant effects on not only the U.S. farming community but also on a slew of related companies and stocks. China's Ministry of Commerce is reportedly targeting a number of U.S. agricultural products as well as many other American-made items, such as automobiles.
Iowa State University assistant professor of economics Wendong Zhang explained the proposed tariffs as a hit on "soybeans, wheat, corn, and cotton...and this is in addition to what [China] announced already on pork and sorghum. So essentially if this becomes a reality two months later, this will be a disastrous situation for U.S. agriculture." Cuttone & Co. trader Keith Bliss explained that "the Chinese are very clever here. They knew that they were going to hit right to the heart of Trump's base of support in the Midwest." Indeed, the area of the country likely to be hit hardest by the tariffs is the central region, already struggling in the face of low crop prices.
While some farmers and commodities communities are concerned about the potential backlash of President Trump's announced tariffs, others support the president's strategy to take a more assertive stance on trade with China. The White House has a 30-day comment period for business interests and other responses from citizens before enacting the tariffs on Chinese products. That period is then slated to be followed by a 180-day period in which the president can make a final decision regarding the formalization of the duties against China.
The escalating trade war began several weeks ago when Trump revealed a 25% duty on steel imports and a 10% tariff on aluminum imports from a specified list of countries. That move prompted Chinese authorities to issue retaliatory tariffs last week, potentially covering as many as roughly 130 different U.S. goods. Soybean futures and other commodities like corn and cotton dipped upon the announcement.