Significant Potential Impact of Tariffs, Trade Retaliation on U.S. Ag Sector

A new economic study paints a troubling picture of the potential results a renewed U.S./China trade war could have on farmers and the ag sector. The study was commissioned by the American Soybean Association and the National Corn Growers Association and conducted by the World Agricultural Economic and Environmental Services.

Soybean and corn exports

• Under a scenario where China reverts to previous tariff levels, U.S. soybean exports to China could fall by 14 MMT to 16 MMT annually, a 51.8% decline from expected baseline levels
• Corn exports to China could decrease by about 2.2 MMT annually, an 84.3% decline from baseline expectations.
• In a more severe scenario with a 60% retaliatory tariff, soybean exports to China could drop by over 25 MMT, and corn exports could fall by nearly 90%.

Price declines

• Under a 60% tariff scenario, U.S. soybean prices could fall by nearly $1 per bushel on average, while corn prices could drop by $0.13 per bushel.
• These price declines would occur at a time when costs remain at record levels and commodity prices are already falling.

Production value losses

• U.S. corn and soybean farmers could lose billions of dollars in annual production value.
• In a worst-case scenario, with Chinese tariffs rising by 60% and other countries increasing tariffs by 10%, projected export decreases could reach $15.8 billion for soybeans, $4.4 billion for corn, $2.3 billion for beef and $2.5 billion for wheat.

Regional economic impact

• States heavily reliant on agricultural exports, such as Iowa, Illinois, and Kansas, could be particularly affected. In these three states alone, GDP losses totaled $3.8 billion through 2019 during the previous trade war.

Input costs

• Farmers reliant on imported machinery, fertilizers and other inputs may face higher costs, further squeezing already tight margins, according to a USDA trade outlook report.

Market share loss

• Brazil and Argentina could increase their exports and gain valuable global market share, potentially difficult for U.S. farmers to reclaim in the future.
• While tariffs could encourage greater investment in domestic manufacturing and agriculture, they also risk destabilizing existing trade agreements like the U.S.-Mexico-Canda Agreement.

Both consumers and farmers could experience inflationary pressures as retailers warn of price increases tied to rising import costs.

Bottom line: The potential for a new trade war poses significant risks to the U.S. ag sector, with wide-ranging impacts on exports, prices and rural economies. The previous trade war’s disruption of around $10 billion per year in exports underscores the magnitude of the threat, and current projections suggest the impact could be even more severe if new tariffs are implemented and retaliation occurs.

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