U.S. Soybean Exports Projected to Drop

In April, China threatened to impose a 25% tariff on U.S. soybeans and tariffs on 105 other American products. This was in response to tariffs that the U.S. Administration proposed on a range of China’s imports valued at $50 billion. In an ongoing tug-of-war over threatened tariffs between the U.S 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 U.S. Soybean exports are projected to drop by $4.5 billion to $7.7 billion if a 25 percent tariff is applied to U.S. soybean exports to China, resulting in a potential farm-level loss of $0.33 to $1.76 per bushel

According to the University of Tennessee’s trade projections, 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. 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. 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.

China imported over 80 MMT of soybeans in 2016, accounting for almost two- thirds of global soybean trade. Soybean imports are primarily used to produce soybean meal, a high- protein ingredient in animal feed. China plays a vital role in U.S. agricultural exports. China has accounted for at least half of all U.S. soybean exports since 2008. U.S. soybeans face significant competition from South American soybeans in China, particularly from Brazil. 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.

In 2017, China accounted for 57.3 percent of U.S. exports including nearly $22 billion in U.S. soybean exports to China. From 2000-2016, Chinese soybean 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. If imposed, a 25% tariff on U.S. soybeans would mean that companies in China would pay 25% more for those soybeans, and the additional money would go to the Chinese government.

According to the University of Tennessee’s trade projections, 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. Overall, Chinese retaliatory tariffs on U.S. soybeans would have a considerable negative impact on U.S. soybean exporters.

Read the full report at ag.tennessee.edu.