The total yearly value of U.S. agricultural exports is approximately $139.8 billion. That number is in jeopardy, however, following all the recent talk of tariffs, exports, and international trade affairs.
The New York Times states that China’s Ministry of Commerce recently announced it would impose tariffs on $3 billion worth of American-produced materials, including pork, wine, seamless steel pipes, fruit, and more than 100 other products.
The move was in response to President Donald Trump’s announcement of tariffs of his own being implied on Chinese steel and aluminum, totaling approximately $60 billion worth of Chinese-manufactured products.
“We do seem to be entering a trade war,” said Eswar Prasad, a senior professor of trade policy at Cornell University. “The U.S. has unsheathed its sword after an extended period of saber rattling, and the Chinese are now unsheathing their weapons. I hope this will not spiral into a very broad set of sanctions on both sides, but I think, given Mr. Trump’s instincts and his very keen desire to deliver a political win whatever the political fallout might be, I don’t think it can be tamped down now.”
According to Reuters, China, being the world’s top steel producer, plans on cutting export taxes on certain steel products and fertilizers. It’s expected that China’s decision will likely cause some concern within the United States and Europe.
“Many countries see China as possibly selling exports at below cost which has put a lot of pressure on global steel prices,” said Chris Jackson, an analyst at UK steel consultancy MEPS. “In light of the reduced volumes, we note that Chinese export offers have increased again quite significantly.”
It’s projected that these steel plate export tariffs will fall from 10% to 5% while billet tariffs will decrease from 15% to 10%.
“If you look at the current situation of the steel market in China, it will remain really tight at least in the first half of next year because of the impact of the winter curtailment,” added Daniel Meng, analyst at CLSA in Hong Kong.
The global food and agricultural industry for 2016 amounted to roughly 10% of the world’s Gross Domestic Product (GDP) but some of these tariffs, as well as crop depletions, could lead to significant changes when it comes to the global trade economy.
China limiting its exports on steel and topsoil, which is typically between two and eight inches thick, could lead to direct issues between the U.S., and many more indirect problems with other nations.
Additionally, the International Grains Council (IGC) is projecting a much smaller global wheat crop this year, falling to its lowest percentage in roughly 6 years. In Australia and Canada, where soil moisture conditions have been rundown in recent months, topsoil moisture is expected to continue to deplete.
The U.S. restrictions on Chinese products include tariffs of 25% on a list of specific goods, which is expected to be outlined in the coming days, followed by a 30-day public consultation. During that 30-day period, however, more talks can be held with the Chinese government and additional lobbyists will likely fight to have their employers’ products removed from the tariff list.
The expected loss to the Chinese economy from the planned tariffs would amount to no more 0.1% of its economic output. JPMorgan noted that the potentially affected exports from China would total 2.2% of the nation’s total exporting; which amounted to roughly $2.3 trillion last year.
“The upshot is that today’s tariffs amount to no more than a slap on the wrist for China,” added Mark Williams, chief Asia economics at Capital Economics.
Another round of tariffs, however, could be imposed on a second group of American products after China evaluates the current market following the trade measure — these additional tariffs could have a much larger impact for both China and the United States.
“China does not want to fight a trade war but is absolutely not afraid of a trade war,” added a Commerce Ministry representative. “We are confident and capable of meeting any challenge and hope that the United States will pause on the brink of a precipice, make careful decisions and avoid dragging bilateral trade relations to a dangerous place.”