There was a long list of issues on the table last weekend when President Donald Trump hosted Chinese leader Xi Jinping at his Florida resort. But trade was certainly high up on the list.
During his campaign for president, Trump was highly critical of China’s trade policies. He blamed losses of manufacturing jobs in the United States on a flood of imports of manufactured goods from China.
Those concerns have carried over into the early days of the Trump administration. Officials have mentioned several measures to reduce the flow of Chinese imports to protect American workers.
Those potential U.S. actions, and reactions from China, could have a major impact on U.S. agriculture. Shipments of soybeans, pork and other products to China have soared in the past decade, making China the single largest customer of U.S. farm goods.
RaboResearch economists Ping Chew, Chenjun Pan and Leif Chiang recently took an extensive look at what trade tensions could mean to U.S. farmers and others in agriculture.
Pressure on commodities
Trade friction, the economists said, could pressure U.S. commodity prices, while boosting prices in countries that compete in the global ag export market. That could prompt farmers in other countries to add acreage and make investments in infrastructure, which would adversely affect U.S. agriculture for years to come, they said.
The RaboResearch economists took a deep dive into the potential impacts of trade tension on the markets for soybeans and pork. Those products are two of the largest Chinese agricultural imports and are key products for Iowa farmers.
If the United States does take action to raise import duties on Chinese imports, there is only a limited possibility that China would retaliate by making sharp cutbacks in purchases of U.S. soybeans, the economists said.
That’s because China needs a lot of soybeans and can’t get all of what it needs from Brazil and other Latin American countries.
However, they said, added Chinese demand could, over time, cause Latin American farmers to expand soybean plantings and build up infrastructure, hurting U.S. farmers.
In addition, China may increase its imports of other oilseeds, such as rapeseed and sunflower, to reduce its overall demand for soybeans.
In pork, China would have an easier time replacing U.S. pork in the event of trade friction, the RaboResearch economists said. Both the European Union and Brazil could fill the gap and have room to expand production, which would cause U.S. pork farmers to feel the economic pain, they said.