The U.S.-China trade war resulted in billions of dollars of losses for both sides in 2018, hitting industries including autos, technology — and above all, agriculture.
Broad pain from trade tariffs outlined by several economists shows that, while specialised industries, including U.S. soya bean crushing, benefited from the dispute, it had an overall detrimental impact on the two largest economies.
The losses may give U.S. President Donald Trump and his Chinese counterpart Xi Jinping motivation to resolve their trade differences before a March 2 deadline, although talks between the economic superpowers could still devolve. The U.S. and Chinese economies each lose about $2.9 billion annually due to Beijing’s tariffs on soya beans, corn, wheat and sorghum alone, said Purdue University agricultural economist Wally Tyner.
Disrupted agricultural trade hurt both sides particularly hard because China is the world’s biggest soya bean importer and last year relied on the U.S. for $12 billion worth of the oilseed.
China has mostly been buying soya from Brazil since imposing a 25% tariff on American soya beans in July in retaliation for U.S. tariffs on Chinese goods. The surge in demand pushed Brazilian soya premiums to a record over U.S. soya futures in Chicago, is an example of the trade war reducing sales for U.S. exporters and raising costs for Chinese importers. “Its something that’s crying for a resolution,” Mr. Tyner said. ”It’s a lose-lose for both the United States and China.”
Total U.S. agricultural export shipments to China for the first 10 months of 2018 fell by 42% from a year earlier to about $8.3 billion, according to the U.S. Department of Agriculture.
The most actively traded soya bean futures contract averaged $8.75 per bushel from July to December 2018, down from an average of $9.76 during the same period a year earlier.
Compensating farmers
To compensate suffering farmers, the U.S. government has allocated about $11 billion to direct payments and buying agricultural goods for government food programmes, after consulting economists, including Mr. Tyner.
In North Dakota, which exports crops to China through ports in the Pacific Northwest, soya farmers face at least $280 million in losses because of Beijing’s tariffs, said Mark Watne, president of the North Dakota Farmers Union.
“You could almost put another $100 million on top of this because all commodity prices are down and that affects North Dakota farmers indirectly,” Mr. Watne said.
China’s tariffs improved margins for the U.S. soya crushers such as Archer Daniels Midland Co. by leaving plentiful supplies of cheap soya beans in the domestic market.
Chinese soya bean mills, on the other hand, front-loaded soy purchases ahead of the tariffs. This led to an oversupply that reduced Chinese processing margins and led factories this summer to make the biggest cuts in years to the production of soya meal used to feed livestock.
China resumed purchases of U.S. soya beans in early December following a trade truce agreed to by leaders from the two countries during the G20 summit in Argentina.
But Beijing kept its 25% tariffs on the oilseed from America, which effectively curbed commercial Chinese buying.
“With the tariffs, the beans can’t go into the commercial system,” said a manager at a major Chinese feed producer. “The buying will have a very limited impact on the market.”
Tech sector hit
China also suffered as products such as phone batteries were hit by U.S. tariffs, and customers began looking to buy from other countries. A study commissioned by the Consumer Technology Association showed the U.S. tariffs on imported Chinese products cost the technology industry an additional $1 billion per month.
The conflict also squeezed U.S. retail, manufacturing and construction companies that had to pay more for metal and other goods.
The Big Three Detroit automakers — General Motors, Ford and Fiat Chrysler— have each said higher tariff costs would dent profits of about $1 billion this year.
