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UNDER THE GUN: Purdue ag economist Chris Hurt says if China goes through with tariffs on pork and soybeans, it would hit soybean farmers hardest.

Economist weighs in on Chinese tariffs

Farmers say China still wants U.S. soybeans, but economists say at some point, a large tariff would make it unprofitable.

Farmers say Chinese buyers touring Indiana still want U.S. soybeans. That sounds positive despite recent tariff talk. However, Purdue University agricultural economists believe that no matter how much Chinese buyers like U.S. soybeans, at some point, dollars and cents talk.

The impact of Chinese tariffs on pork and soybeans is tough to predict. Here are questions on that topic from Farm Progress, answered by Chris Hurt, Purdue Extension ag economist.

How did we get to this point with tariffs? The Chinese tariff on U.S. pork was announced on April 2 and was effective immediately. As of May 10, it’s not clear if they’ve implemented it.

The Chinese tariff on U.S. soybeans was announced April 4. The Chinese announcement did not state when the additional tariffs “will enter into force.” As of May 10, there was no definite date.

The Chinese pork tariff was in response to President Donald Trump’s $3 billion of tariffs on imports of steel and aluminum. I believe the U.S. has put those in place. However, they’ve been exempting much of the world except China.

The U.S. threatened $50 billion of U.S. tariffs over intellectual property rights. There was a 60-day comment period in the U.S. China retaliated with $50 billion that included soybeans on April 4.

What is the outlook in the short run? The continued hope of U.S. agriculture is that the U.S. and China will resolve trade differences and avoid most, if not all, of these tariffs. China upped the ante in late April by forcing a deposit of 179% on U.S. sorghum for the next four months. Reuters news service reported on April 20 that 20 vessels of U.S. sorghum were headed to China, but shippers diverted to other destinations.

What do you make of this action? First, China is likely showing it’s very serious about tariffs if the Trump administration doesn’t back down. Second, a tariff of 179% is almost twice the value of the sorghum. No buyer or seller will pay that huge tax.

What if these tariffs proposed by China are put in place? Soybeans are a much bigger deal for U.S. farmers [than pork]. China is nearly self-sufficient for pork consumption, anyway. We don’t want to lose any pork business, but losses from the pork tariffs would be about $350 million.

However, China imports 87% of the beans they use. About 30% of U.S. production will be exported to China in the current marketing year. Our estimate is that U.S. farmers would be harmed by about $2.1 billion per year. China will have to buy some U.S. beans because they’re such huge importers, and the rest of the world doesn’t produce enough to supply China. However, the tariff would make U.S. beans higher-priced, so they would buy the smallest amount possible from the U.S.

A Purdue trade model says that over five years, U.S. soybean exports to China will drop by 65%, total U.S. soybean exports to the world by 37% and U.S. soybean acreage by 15%. Prices would drop by 5%, or about 50 cents per bushel on $10-per-bushel soybeans.

A farmer says visiting Chinese soybean buyers claimed they will buy U.S. beans due to better quality, tariff or not. What do you make of this? Quality issues probably don’t come close to compensating for the higher price of U.S. soybeans under a 25% Chinese tariff. I would guess the Chinese buyers were just saying they liked the overall quality of U.S. soybeans and wanted to have good relationships with U.S. farmers. They may also realize they will still have to buy some U.S. beans under a tariff. Buyers could also be indicating they didn’t feel the Chinese government would actually put tariffs in place on soybeans. The proposed tariff hurts Chinese consumers, too.

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