As Chinese Trade Tensions Build, Do Ohio Producers Need to Worry?

By Ben Brown and Ian Sheldon

The attached link is a report summarizing the impact of Chinese tariffs on U.S. soybeans, corn and pork.

A short summary follows:

Chinese tariffs on U.S. soybeans have not been implemented yet, but concern throughout the U.S. agricultural industry and Ohio exists because of uncertainty in export markets and commodity prices. Ohio exports $50 billion of products worldwide and $3.9 billion of agricultural commodities. The three largest markets for Ohio agricultural exports are Canada, China and Mexico with especially strong growth in the Chinese market since 2010. The U.S. is the second largest supplier, behind Brazil, of soybeans to China at 39%, and a tariff on U.S. soybeans would likely strengthen Brazil’s position in the market. Roughly, 31% of U.S. soybeans are exported to China, which would fall to 22%, a loss to Ohio of an estimated $241 million. Ohio exports to China of raw commodities are strongest for soybeans with large corn processing and domestic use limiting raw corn exports. Through calculations made based on a representative west central Ohio farm, and assuming an average degree of Chinese substitution between U.S. and Brazilian soybean import, it is estimated that average net income per year (2018-2024) would drop from $63,577 to $26,107 under the proposed tariff, which translates to a 59% decrease in net farm income. Import tariffs by the U.S. of Chinese steel will likely increase machinery costs and the cost to produce agricultural inputs that heavily rely on steel infrastructure by raising the domestic price. Weakening financial health through debt coverage and lower land values will continue to erode the financial health of Ohio farm families. The net worth of the representative farm decreased 6% from the baseline in projection year 2024 under the proposed tariffs. Larger farm incomes in the beginning of the decade would have showed a lower percentage decrease than the current farm margins.

These data should not be seen as a concrete prediction, as an analysis of external factors such as weather and shifts in demand could alter the outcomes. Reducing trade barriers with countries that depend on U.S. agricultural commodities strengthen the U.S. ability to sell in a world economy. The U.S. is currently renegotiating several of its free trade agreements while also encouraging bilateral deals with several of the world’s largest agricultural consuming countries. The North American Free Trade Agreement already allows most commodities to flow across the border at a 0% tariff, meaning that a new negotiated agreement between the countries will not increase exports to Canada and Mexico for corn and soybeans. The large agricultural disagreement in the NAFTA negotiations is around Canada’s dairy supply management program. The Korean- U.S. trade agreement named KORUS is also being reviewed, but talks have slowed after initial excitement over a completed agreement.



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