American farmers are having a bumper year—thanks to soaring demand from China
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One of the most frequent criticisms of Donald Trump’s trade war with China was that American farmers would get caught in the crossfire.
A chorus of economists and industry experts warned that if Trump were to impose tariffs on Chinese products in his effort to eliminate the trade deficit and bring manufacturing jobs back home, the world’s most populous nation would retaliate by slapping reciprocal duties on American farmers.
Soybean, dairy, and pig farmers are among America’s biggest exporters. But they also were (and remain) a critical part of Trump’s political base. Farmers were often described as Trump’s “weak spot” in his face-off with China.
Even if Trump eventually succeeded in closing a trade deal, skeptics cautioned, the danger was that while the two sides haggled, China might permanently shift agricultural purchases to other countries such as Brazil.
That’s not exactly how the confrontation has played out.
True, China responded to Trump’s tariffs as predicted, placing steep tariffs on nearly all U.S. agricultural products, and sending U.S. exports of soybeans and feed grains into a tailspin. And, as we’ve noted often in this space, Beijing remains far short of the promise it made in a January 2020 trade agreement to buy at least $200 billion more in U.S. goods and services in 2020 and 2021.
But China’s purchases of U.S. agricultural products are now within hailing distance of the trade truce’s targets. U.S. farm exports to China in 2020 were 82% of levels envisioned in the trade deal, according an estimate by the Peterson Institute of International Economics.
And this year American farmers—who were shielded from the impact of China’s tariffs by billions in federal subsidies—are emerging from the fracas in rude health and looking forward to one of their best years ever. On May 26, the U.S. Department of Agriculture forecast U.S. farm exports for the fiscal year ending in September will reach $164 billion—a 21% increase over last year and the highest total on record.
The key driver of that surge: China, to which the USDA expects U.S. farm exports to rise to $35 billion, a record high. The agency predicts that this year China will return to its pre-trade war status as the largest buyer of U.S. farm goods, swallowing 23% of total U.S. agricultural exports of $164 billion.
“For U.S. Farmers, China is Back and Bigger Than Ever,” blared a March headline in the Wall Street Journal. As the Financial Times noted this week: “China is now at the heart of a reversal in [U.S.] farmers’ fortunes.”
Several factors have aligned to rekindle China’s voracious appetite for U.S. farm goods. The Chinese economy bounced back quickly from the coronavirus pandemic. Chinese pig farmers have mostly contained a deadly outbreak of swine flu and are trying to regrow their herds, boosting demand for soybeans, which are crushed to make pig feed. Meanwhile, Brazil’s soybean farmers are battling the country’s worst drought in nine decades.
This reversal of fortune—with China suddenly dependent on U.S. farmers rather than seeing them as a source of political leverage—doesn’t necessarily prove Trump’s assertion that “Trade wars are good, and easy to win.” But at the very least it proves that trade wars are unpredictable and shows how quickly the tables can turn.
More Eastworld news below.
This edition of Eastworld was curated and produced by Grady McGregor. Reach him at firstname.lastname@example.org.
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