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What Does a Trade War with China Look Like?

This article discusses the potential consequences of a trade war between the US and China on the agricultural industry and explores the need for export markets for US farmers. It also addresses why China is an important market for US agricultural products and highlights the long-term impacts of trade disputes on the industry.

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What Does a Trade War with China Look Like?

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  1. What Does a Trade War with China Look Like? Wendong Zhang & Chad Hart Assistant Professor and Associate Professor of Economics and Extension Economists wdzhang@iastate.edu, chart@iastate.edu Iowa Institute of Cooperatives Summer Workshop Huxley, Iowa, June 18th, 2018

  2. A Quick Introduction:Dr. Wendong Zhang • Grown up in a rural county in NE China • Attended college in Shanghai and Hong Kong • Ph.D. in Ag Econ in 2015 from Ohio State • 2012 summer intern at USDA-ERS on farm economy and farmland values • Research and extension interests: land value/ownership www.card.iastate.edu/farmland/ agriculture and the environment China Ag center www.card.iastate.edu/china

  3. China’s Provinces My Hometown

  4. Mainland China vs. US

  5. My hometown: Shenxian, Shandong Province Greenhouse – plastic film - Shandong Province

  6. https://www.card.iastate.edu/china

  7. Why Care About China?Reason 1: China is a huge market for US Source: Choices 2017 Q2 Issue

  8. US holds a large and consistent ag trade surplus with China

  9. Share of China in US Ag Exports 5% 0% 12-15% 2% 75% 16% 15-18% 0% 1% 62%

  10. Why Care About China? Reason 2: Ag is comparative advantage for US, not for China Average Farm Size China: 2 Acres US: > 400 Acres

  11. China Corn Yield 2015 Soybean Yield US: 48 Bu/acre Iowa: 56 Bu/acre China: 26 Bu/acre China Soybean Yield

  12. Why Care About China? Reason 3: Chinese People Are Getting Richer, and will need more protein

  13. Future of High-Speed Rail in China

  14. Why Care About China? Reason 4: China will retaliate, diversify and find other suppliers if possible China’s Ag Import Sources China can produces 97% of its pork, but only 15% of its soybean demand domestically

  15. US Loses Market Share as China Increases Meat Imports from the World Source: Choices 2017 Q2 Issue

  16. Belt and Road Initiative

  17. Seasonality of Soybean Imports by China If the disputes were resolved before harvest, we might be OK

  18. Why Care About China?Reason 5: Trade disputes with China have long-term impacts (chicken, beef)

  19. Why Care About China?Reason 6: Chinese Ag Policy Presents Future Demand that could be filled by our competitors Li Hayes Zhang 2017 Ag Policy Review China’s projected corn import potential under the new 2020 E10 ethanol mandate

  20. China’s Ethanol Trial • China’s Ethanol Industry in 2016 • 4th largest producer – 1 Bil gal. • After US, Brazil and EU • Corn ethanol 64% • Also uses cassava, sorghum, corn stover • Imported 225 mil. gal, mainly from U.S. • Tariff rose from 5% to 30% • China consumes 40 bil. gal gasoline; 1 bil. gal ethanol in 2016

  21. What a World w/o Trade War Look Like?

  22. The Export Potential to China if China removes trade barriers

  23. https://www.card.iastate.edu/farmland #ISUlandvalueJune 28 News Conference Iowa Farmland Ownership Survey http://bit.ly/ISU2017Owner

  24. Corn Use for the Next Decade Source: USDA-OCE

  25. Soybean Use for the Next Decade Source: USDA-OCE

  26. Arable Land

  27. Why do U.S. farmers need export markets? • That’s where the customers are • That’s where the economic growth is • That’s where the consumption growth is • We produce surpluses • We only eat high on the hog • Exports are crucial to farm income

  28. 96% of the world’s population lives outside the US Source: CIA World Factbook

  29. Population growth 2017 to 2050 Source: World Bank

  30. Economic growth rates Source: CIA World Factbook

  31. Corn Export Sales Source: USDA-FAS

  32. Corn Export Shifts Source: USDA-FAS

  33. Soybean Export Sales Source: USDA-FAS

  34. Soybean Export Shifts Source: USDA-FAS

  35. Soybean Trade Last Year Source: USDA-FAS

  36. Soybean Trade This Year Source: USDA-FAS

  37. Sorghum Export Shifts Source: USDA-FAS

  38. Pork Export Shifts Source: USDA-FAS

  39. Pork Trade Last Year Source: USDA-FAS

  40. Pork Trade This Year Source: USDA-FAS

  41. Beef Export Shifts Source: USDA-FAS

  42. Ethanol Exports Source: EIA

  43. Value of Ag Trade Source: USDA-FAS

  44. U.S. Ag Exports Source: USDA-FAS

  45. Top ten US ag export markets, 2016 Source: US Census Bureau, Foreign Trade Statistics, FATUS export aggregations

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