Retaliatory tariffs could cost billions in reduced US soybean exports

May 4, 2018 by Tina M. Johnson, University of Tennessee Institute of Agriculture
Researchers at the University of Tennessee Institute of Agriculture estimate billions would be lost in export dollars should China impose a tariff on US soybeans.? Credit: T. Johnson, courtesy UTIA.

In an ongoing tug-of-war over threatened tariffs between the United States and the Chinese government, researchers at the University of Tennessee Institute of Agriculture have examined potential impacts to U.S. soybean exports at three hypothetical tariff rates. The research indicates that exports are projected to drop by $4.5 billion to $7.7 billion if a 25 percent tariff is imposed, with even greater losses should a higher tariff be levied.

China plays a vital role in U.S. agricultural exports. In 2017, China accounted for 57.3 percent of U.S. exports including nearly $22 billion in U.S. soybeans. From 2000-2016, Chinese imports increased from $2.3 billion to a high of $40 billion—an increase of more than 1,600 percent. This marked growth is largely attributed to China's growing demand for livestock and feed products, as soybean imports are primarily used to produce soybean meal, a high-protein ingredient in animal feed.

However, U.S. soybeans face significant competition, particularly from Brazil. The U.S. was the leading supplier of soybeans to China for many years until being surpassed by Brazil in 2013. Brazil's increased production and long-term growth potential coupled with infrastructure investment in partnership with numerous Chinese companies have facilitated gradual transition from the U.S. to Brazil as the largest source of China's soybean imports. Tariff projections indicate that for every 1 percent increase in the price of U.S. soybeans, Chinese imports of U.S. soybeans decrease by 1.3 percent, while imports of Brazilian soybeans increase by 1 percent.

Soybean acreage has increased in the U.S. from 76.8 million acres in 2013 to 90.1 million acres in 2017. Likewise, U.S. soybean exports have also increased, with the exception of the 2017/2018 marketing year, and consistently account for about half of total U.S. production. In the past five years, farm-level production has been estimated at $40 billion annually.

U.S. soybean producers are reliant on foreign markets as a source of demand for their production. "China is responsible for nearly two-thirds of global soybean imports," says UTIA professor and Blasingame Chair of Excellence Andrew Muhammad. "As such, if China places retaliatory tariffs on U.S. soybeans, there could be profound implications for U.S. soybean exports and farm-level losses for U.S. soybean producers."

The UTIA study, which was authored by Muhammad and his colleague Aaron Smith, considered trade projections based on three hypothetical tariff rates on soybeans, as follows: a 10 percent tariff is projected to reduce U.S. exports by $1.8 billion but could fall as much as $3.1 billion; at 25 percent, projected reductions are $4.5 billion to $7.7 billion; and at 50 percent, projected reductions are $9 billion to $15.3 billion.

Average annual farm-gate prices for soybeans have ranged from a high of $13 per bushel in 2013 to a low of $8.95 per bushel in 2015. If a 25 percent tariff is applied to U.S. soybean exports to China, UTIA researchers estimate potential farm-level losses could reach $0.33 to $1.76 per bushel. With higher tariffs, the losses would be even greater. However, projected losses for U.S. producers due to lower soybean exports to China could be partly offset by an increase in exports to other countries.

Explore further: German carmakers worst hit by China tariffs: study

More information: Read the full report: UT Extension publication W 532, Evaluating the Impact of Retaliatory Tariffs on U.S. Soybeans in China, Muhammad and Smith, April 2018.

Related Stories

Soybean genomes unmasked

March 22, 2018

Approximately 340 million metric tons of soybeans are produced globally each year, with the market for soybeans worth $40 billion in the U.S. alone. Having a map of soybean genes is key for breeders, who work to develop varieties ...

Harvesting clues to GMO dilemmas from China's soybean fields

September 18, 2015

China's struggle - mirrored across the globe—to balance public concern over the safety of genetically modified (GM) crops with a swelling demand for affordable food crops has left a disconnect: In China's case, shrinking ...

Brazil to overtake US as top soybean producer

March 12, 2013

An Iowa State University grain markets expert said this week that a combination of long-term trends and recent weather patterns are responsible for putting Brazil in a position this year to overtake U.S. soybean production ...

High yield, protein with soybean gene

November 22, 2017

Leftovers can be quite valuable. For instance, when soybean seed is crushed and the oil extracted, what's left is called soybean meal. You'll want to save this leftover.

Recommended for you

Nanoscale Lamb wave-driven motors in nonliquid environments

March 19, 2019

Light driven movement is challenging in nonliquid environments as micro-sized objects can experience strong dry adhesion to contact surfaces and resist movement. In a recent study, Jinsheng Lu and co-workers at the College ...

OSIRIS-REx reveals asteroid Bennu has big surprises

March 19, 2019

A NASA spacecraft that will return a sample of a near-Earth asteroid named Bennu to Earth in 2023 made the first-ever close-up observations of particle plumes erupting from an asteroid's surface. Bennu also revealed itself ...

The powerful meteor that no one saw (except satellites)

March 19, 2019

At precisely 11:48 am on December 18, 2018, a large space rock heading straight for Earth at a speed of 19 miles per second exploded into a vast ball of fire as it entered the atmosphere, 15.9 miles above the Bering Sea.

Levitating objects with light

March 19, 2019

Researchers at Caltech have designed a way to levitate and propel objects using only light, by creating specific nanoscale patterning on the objects' surfaces.

1 comment

Adjust slider to filter visible comments by rank

Display comments: newest first

not rated yet May 05, 2018
'ultracrepedarian' is not a funny joke. The red staters, pumped up by the Russian propaganda machine, run by Ailes and the Koch brothers, put Trump into the White House. And now they are paying a bitter price for supporting the altright's quisling duplicity to dictate social engineering, nation wide with an evangelical fervor.

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.