The Biden administration recently announced large, increased tariff rates for Chinese electric vehicles, solar cells, semiconductors, and aluminum and steel products. This raises the possibility of another trade war with China that could impact agriculture.
Economists from the University of California (UC), Davis, and North Dakota State University (NDSU) evaluated the potential implications of the U.S. revoking China’s Permanent Normal Trade Relations (PNTR) status. They found that if China retaliated against a change in China’s PNTR status, it could lead to a 9.5% increase in China’s agricultural import tariffs, resulting in potential trade losses to California agriculture of around $1 billion annually.
California agriculture was hit hard by the 2018-19 trade war with China, and many industries have still not recovered from its effects. Despite this, there is increasing support in Congress for further restrictions on trade with China, with proponents asserting that China is not complying with the World Trade Organization’s regulations.
The authors’ research suggests that some product groups, such as horticultural products, dairy, livestock and meats, would likely experience even steeper than average increases in import tariffs.
“The impact on import tariffs for non-agricultural sectors would be even larger, with the average import tariff going up from 3.9% to 32.5%,” said Colin A. Carter, distinguished professor in the Department of Agricultural and Resource Economics at UC Davis and co-author of the study.
For all California agricultural exports, they estimated an average decline in export value between 28.4% and 34.8% when comparing a scenario where China’s PNTR status is revoked to one where it is not. This translates into an estimated trade loss of between $0.8 and $1 billion, using 2023 California agricultural exports.
Some crops that rely heavily on China for exports, such as tree nuts, would be more severely impacted by these effects, particularly considering that some of them are still subjected to residual tariffs from the 2018-19 trade war.
The last trade war between the U.S. and China led to significant decreases in crop prices and lost export opportunities. And, as co-author Sandro Steinbach, associate professor in the Department of Agribusiness and Applied Economics and the Director of the Center for Agricultural Policy and Trade Studies at NDSU notes, “Once access to a market is lost, gaining it back is difficult, as the 2018-19 trade war has shown.” — Giannini Foundation of Agricultural Economics
