ST. LOUIS, Mo. – A newly-released study, commissioned by the American Soybean Association (ASA) and the National Corn Growers Association (NCGA), shows a new trade war between the U.S. and China would result in an immediate drop in corn and soybean exports, causing the loss of hundreds of millions of tons of the two grains, according to researchers.

Conducted by the World Agricultural Economic and Environmental Services in Columbia, Mo., the study said Brazil and Argentina would claim the lost market share as a result, which would be extremely difficult for American growers to reclaim in the future.

“The U.S. agriculture sector is going through a significant economic downturn,” said Scott Gerlt, ASA chief economist. “This work shows that a trade war would easily compound the adverse conditions that are placing financial stress on farmers. Even when a trade war officially ends, the loss of market share can be permanent.”

Krista Swanson, NCGA lead economist, said, “The study highlights the dangers that come with broad tariffs on imports. While launching widespread tariffs may seem like an effective tool, they can boomerang and cause unintended consequences. Our first goal should be to avoid unnecessary harm.”

The study comes as U.S. lawmakers and officials from both political parties are increasingly looking at tariff-forward approaches as they work to address troubling Chinese trade practices. Researchers modeled several scenarios that could play out in a new U.S.-China trade war, and found a consistent outcome:

- Severe drop in U.S. exports to China: Many of the tariffs China imposed on U.S. agricultural products from the 2018 trade war remain in place, but have been granted a waiver that has been renewed annually, the study said. These tariffs could easily be reinstated by China. (According to the U.S. Trade Representative Office, the U.S. and China signed a historic and enforceable agreement on a Phase One trade deal Jan. 15, 2020. The agreement requires structural reforms and other changes to China’s economic and trade regime).

If China cancels its current waiver (from the 2020 Phase One agreement) and reverts to tariffs already on the books, U.S. soybean exports to China would, according to the study, fall 14 to 16 million metric tons annually, an average decline of 51.8 percent from baseline levels expected for those years. U.S. corn exports to China would fall about 2.2 million metric tons annually, an average decline of 84.3 percent from the baseline expectation.

- Brazil and Argentina would benefit: Brazil and Argentina would increase exports and thus gain valuable global market share. Chinese tariffs on soybeans and corn from the U.S., but not Brazil, would provide incentive for Brazilian farmers to expand production area even more rapidly than baseline growth, the study said.

- No place to turn: While it is possible to divert exports to other nations, the study found there is insufficient demand from the rest of the world to offset the major loss of soybean exports to China to support the farmgate value (the price of farm produce directly from the producer, which does not include transportation or marketing costs).

The study also found a new trade war would lead to a steep drop in soy and corn prices, resulting in a ripple impact across the U.S., particularly in rural economies where farmers live, purchase inputs, use farm and personal services, and purchase household goods.

ASA and NCGA officials said they 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 said they support thoughtful consideration of the impacts tariffs and tariff retaliation could have on U.S. farms and rural communities.

Virginia Houston, ASA director of governmental affairs, told Farm World, “U.S. soy’s trade priorities are focused on opening new export markets, while at the same time, maintaining existing markets. Our largest export partner is China, which accounts for approximately one-third of annual U.S. soy exports.

“The study showed that the true winner of a U.S.-China trade war is Brazil,” she said. “Brazil would be incentivized to increase its domestic commodity production to capture more Chinese demand. At the same time, U.S. soy and corn prices would drop, while commodity prices in South America would increase, further benefiting their farmers.”

She said the ASA has worked to educate members of Congress about the need for a measured approach when it comes to China.

“The scale of Chinese demand for soybeans cannot be replicated by other markets, as China consumes more U.S. soy than the rest of the world combined,” she said. “U.S. soybean farmers are all too aware that markets take decades to build but can be lost overnight.

“The American Soybean Association opposes any efforts to repeal or modify China’s Permanent Normal Trade Relations status, as such a move would likely invite immediate retaliation against U.S. agricultural exports,” she added.

To help bolster existing efforts to open new markets, she said the soybean association continues to push for a new farm bill in 2024.

“The House Agriculture Committee’s farm bill included doubling of mandatory funding for two of the USDA’s trade promotion programs, the Market Access Program and the Foreign Market Development program,” she said. “These two programs are critical to assisting U.S. agriculture in creating and growing demand for U.S. commodities.”

To read the full report, visit: www.ncga.com.