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AG ECONOMIC INSIGHTS ISSUES REPORT "TRADE WAR CONSEQUENCES AND IMPACTS"
Jun. 4, 2019
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| Figure 1. Value of Total U.S. Ag Exports to China, 2000 - 2018. Data Source: USDA GATS.
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Agricultural Economic Insights reports:
To view the complete report, click here.
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| Figure 2. U.S. Soybean Exports, Total (in blue) and to China (in orange), 2000- 2018. Data Source: USDA GATS.
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As the bitter reality of a seemingly never-ending (and possibly expanding) trade war crashes down on the farm sector it's useful - albeit sobering- to think about the economic consequences and impacts.
Exports
Although it's hard to say exactly when the Trade War with China began, the U.S. farm economy has clearly felt its impacts. The most notable of these impacts began officially in July 2018 when China imposed a 25% retaliatory tariff on soybeans imported from the U.S.
However, the reach of the Trade War extends well beyond soybeans. For reference, the value of total U.S. exports to China in 2017- pre-Trade War- was nearly $130 billion. Ag exports accounted for about 15% of total U.S. exports to China that year.
Figure 1 shows the value of annual U.S. ag exports to China since 2000. As we noted in an earlier post, the chart shows two stories: the boom in ag exports during the farm economy expansion, and the trade war impact. From the early 2000s to 2012/2013, exports to China increased an incredible pace. Weak commodity prices from 2014 to 2017 translated in a lower value of exports to China (one of the challenges of using the value of exports to measure activity).
Take note at the change from 2017 to 2018. The value of total ag exports to China in 2017 was roughly $19 billion. In 2018, ag exports to China fell by more than 50%, to $9 billion. Thinking about 2019, one has to wonder how low the value of ag export to China might fall should the trade war last through the full calendar year.
Soybeans have gotten much of the attention in the Trade War because China is such an important market for soybeans. Figure 2 shows two measures of soybean exports- total bushels exported (in blue) and bushels exported to China (in orange). Pre-Trade War, soybean export to China had been at or above 1 billion bushels annually since 2014. Since 2009, China has accounted for over one-half of all U.S. soybean exports. In 2018, exports to China fell to 300 million bushels, levels last observed pre-2003. The change from 2017 to 2018 was a 74% decline.
While the U.S. increased exports to other countries, total export activity slumped since the Trade War began. After 2+ billion bushels of exports in 2016 and 2017, total soybean exports in 2018 were 1.7 billion bushels, a 16% decline from 2017.
The sharp contraction in soybean export certainly has the makings of an adverse demand shock. The question is how long this will be sustained.
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