Last week China issued a list of 106 U.S. products and goods, 37 of which are agricultural, that will face additional tariffs in retaliation to the April 3 announcement by the Trump Administration that the U.S. intends to enact tariffs on $50 billion of imports from China. The latest Chinese list includes soybeans, corn, and beef, the top three exports commodities from Nebraska, and are in addition to a list announced earlier which included added tariffs on pork and ethanol. Last Friday, it was revealed President Trump has instructed administration officials to investigate whether tariffs on another $100 billion of Chinese goods is warranted. Thus, it appears the U.S. and China are rapidly escalating to a full-fledged trade war.
For Nebraska, the biggest potential impacts of last week’s events in terms of total dollar value will be to soybean producers. Soybeans are the United States’ top ag export to China. Thirty percent of U.S. soybeans—about $14 billion per year—go to China. In 2016, soybeans were also the top export commodity for Nebraska, totaling $1.66 billion, and is the top export commodity for 42 counties. Because 50 percent of U.S. soybean exports go to China, it’s a safe bet that 50 percent of Nebraska soybeans are shipped there as well.
Agricultural economists at Purdue University analyzed the possible impacts of a Chinese tariff on U.S. soybeans for the U.S. Soybean Export Council. The analysis examined the impacts of a 30 percent tariff (the actual tariff will be 25 percent if imposed) and found, “Chinese imports of U.S. soybeans could drop by 71 percent, total U.S. soybean exports could fall by 40 percent, and total U.S. soybean production could decrease by 17 percent.” In short, the results show that an ongoing trade dispute with China could cause significant harm to U.S. soybean producers.
The proposed U.S. tariffs will not take effect until after a comment period in May. The administration then has up to 180 days to make a final decision—time when negotiations with China could result in a deal to avert the tariffs. The good news is China and the U.S. are talking, according to administration officials, but that doesn’t stop the market reaction and impacts the dispute is already having on commodity prices. At one-time last week, the price declines for soybeans and corn had cost Nebraska producers over $100 million in value on crops in storage—$100 million Nebraska producers can ill afford to lose.
Jay Rempe is the senior economist for Nebraska Farm Bureau. Rempe’s background in agricultural economics, years of experience in advocating at the state capitol, and a firm grasp of issues allow him to quantify the fiscal impact of a regulatory proposal, and provide an in-depth examination of key issues affecting Nebraska’s farmers and ranchers.