Ag Policy Blog

OMAHA (DTN) -- U.S. corn and soybean exports risk losing a significant share of the Chinese market to Brazil and Argentina if the U.S. reintroduces aggressive tariffs.

That's the conclusion of a new study released by American Soybean Association (ASA) and National Corn Growers Association (NCGA). The study highlights another trade war with China could cost corn and soybean farmers roughly $5 billion to $8 billion a year in lost value. Filling the void would be South American farmers who would see higher prices and convert more acreage to crops.

The study emphasized the risks of a trade war on hundreds of thousands of farmers, a majority of whom likely support former President Donald Trump over Vice President Kamala Harris in the presidential race.

"Leaders at NCGA and ASA believe it is in America's economic interests to maintain a trading relationship with China, even as both governments work through trade and other concerns. They also noted they support thoughtful consideration of the impacts tariffs and tariff retaliation could have on U.S. farms and rural communities," the groups stated in a news release.

Citing that both corn and soybeans "are prime targets for tariffs," ASA and NCGA asked an analysis group, the World Agricultural Economic and Environmental Services (WAEES) to study the impact of a trade war on the two commodities. The result is that another trade war would lead to more cropland conversion in South America, "which has permanent ramifications on soybean and corn exports worldwide. And U.S. soybean and corn growers bear the burden."

RECENT HISTORY ON TARIFFS

Tariffs function as a tax on incoming imports that countries set but often reduce through trade negotiations. Tariffs also have been used by U.S. presidents to protect industries. In his first term, Trump imposed tariffs on all steel and aluminum imports, citing the need to protect domestic production.

Using a different rationale, Trump also imposed 10% to 25% tariffs on an estimated $370 billion in goods from China in 2018. Some of these tariffs on China were eased when Trump signed an agreement with China in early 2020 that required China to import more volumes of U.S. goods, including $40 billion a year in agricultural products.

The Biden administration has reduced some of the steel and aluminum tariffs, with some trading partners, but largely left the remaining tariffs on Chinese goods in place.

TRUMP FOCUSED ON TARIFFS AS A BARGAINING TOOL

Tariffs remain a central part of Trump's campaign agenda. He has called for tariffs of 10% on all imports and wants a 60% tariff on imports from China. CNBC reported during the weekend on an analysis from investment bank Piper Sandler that Trump's former U.S. Trade Representative Robert Lighthizer has told Wall Street clients Trump would move quickly to impose those tariffs "shortly after taking office."

Trump also last month warned U.S. companies such as John Deere that he would impose tariffs on the company's equipment coming from Mexico. He also said he would impose a 100% tariff on automobiles coming out of Mexico.

Trump has frequently championed the value of tariffs when it comes to negotiating concessions from other countries.

"Tariffs are the greatest thing ever invented," Trump said at a Michigan rally in September.

CHINA TRADE WAR AND AFTERMATH

The study recaps the 2018-19 trade war with China that led to $27 billion in lost agricultural exports in that stretch. The Trump administration responded by using the Commodity Credit Corp. to spend $23 billion on ad-hoc subsidies to farmers under the Market Facilitation Program. China responded after the trade war with record-breaking purchases that totaled $59.2 billion over a two-year stretch (2020-21) but still fell short of the $80 billion in commitments, the study cites.

Still, the pandemic complicated trade in 2020. USDA's Foreign Agricultural Service (FAS) statistics show China bought $70.87 billion in the 2021 and 2022 time period, which included $38.1 billion in 2022. That coincided with record net farm income in 2022. China has dialed back its imports of U.S. goods since that 2022 peak. In the first eight months of 2024, sales to China are down 15% from 2023, according for FAS reports.

China still has tariffs on a broad range of U.S. agricultural products, but they sell to China under a waiver that has held those tariff rates in check. Raw soybeans, for instance, face a 30.5% tariff that is waived down to 3% right now. Corn has a 26% tariff if it is in the quota volume that is 1% under the waiver.

In the 2023-24 USDA marketing year that ended Sept. 1, China bought 24.3 million metric tons (mmt) of soybeans, down 7 mmt from the previous year. For corn, China bought 2.8 mmt, a 62% fall from the previous marketing year when China bought 7.5 mmt of U.S. corn.

TWO CHINESE TARIFF SCENARIOS

The study looked at how China might respond to U.S. tariffs over a 10-year stretch. Overall, Argentina, Brazil and other trading partners would have lower tariff rates and an advantage in selling to China. Overall, U.S. soybean and corn exports would drop while Brazil would gain market share.

Under a scenario in which China drops its waivers:

-- The 30.5% soybean tariff kicks in and sales to China would drop 14 mmt to 16 mmt -- 514 million bushels (mb) to 588 mb -- annually, or nearly 52% from baseline levels projected during the next decade. Soybean prices would drop about 60 cents per bushel below the 10-year baseline forecasts. Farmers in Argentina and Brazil would see prices bump up 75 cents a bushel.

-- Corn sales would fall about 2.2 mmt (about 87 mb) during the same time, or about an 84% drop from expectations. Corn prices would fall by about 8 cents a bushel on average. But farmers in Argentina and Brazil would see prices rise 12 cents per bushel.

While the U.S. could divert to selling elsewhere -- especially for lost corn volume -- the study notes "there is not enough demand from the rest of the world to offset the major loss of soybean exports to China."

Under a second scenario in which China invokes a 60% retaliatory tariff:

-- Soybean exports drop 25 mmt -- keeping in mind sales to China this past year were 24.3 mmt. Soybean prices would drop by nearly $1 a bushel.

-- Corn exports would fall nearly 90%. Corn prices would drop 13 cents a bushel.

In the 60% scenario, Brazil would gain an average of 8.9 mmt in soybean and corn exports during the next decade while the U.S. overall would lose somewhere between 2.9 mmt and 4.6 mmt in soybean and corn exports.

Depending on the scenario of tariffs, soybean farmers would lose $3.6 billion to $5.9 billion a year in value. Corn farmers would lose up to $1.4 billion. This is likely a double impact given the majority of farmers who raise soybeans also raise corn.

"The impact on U.S. soybean and corn farmers isn't limited to a short-term price shock; This is a long-lasting ramification that changes the global supply structure."

The full study can be viewed at: https://ncga.com/…

Also see, "Budget Showdown: Harris and Trump's Fiscal Plans Could Add Trillions to US Debt," https://www.dtnpf.com/…

"Farm Leaders Reveal Sharp Contrasts for Agriculture Under Harris and Trump Presidencies," https://www.dtnpf.com/…

"Presidential Candidates Answer AFBF Questions on Ag, Rural America," https://www.dtnpf.com/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on social platform X @ChrisClaytonDTN

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