There were fears that even though U.S. ag exports to China were rising after the countries agreed to a trade war détente during the Trump administration, the U.S. might never recover its pre-trade war share of China’s imports.
A new study shows those fears were unfounded now that the U.S. has recaptured and surpassed the roughly 20% market share it commanded before President Donald Trump began hitting the Chinese with tariffs.
U.S. market share of China’s agricultural imports in 2022 were “about equal to its share in 2017, prior to the US-China trade dispute,” says Virginia Tech professor Jason Grant in a paper titled “U.S. Agricultural Exports to China Soar and Market Share Returns to Pre-Trade War Levels” and published in the journal Southern Ag Today.
U.S. ag exports to China plummeted during the Trump administration trade war as the two countries slapped tariffs on each other. Trump hit China with tariffs to punish the country for intellectual property theft and policies of forced technology transfer and China retaliated with tariffs on U.S. ag commodities.
The impact on U.S. ag exports was immediate and dramatic. Whereas China was buying 20% of all its ag import needs from the U.S. in 2017, that dropped to just 12% in 2018 and then fell further to 10% in 2019.
Meanwhile, other countries were filling the void. Brazil’s market share of Chinese imports rose dramatically from 21% in 2017 to 27% in 2018, according to Grant’s research. But Brazil’s market-poaching move was short-lived, said Grant. By 2018, China was again buying less from Brazil and the country’s market share of Chinese ag imports has ranged between 22% and 24% since then.
“It’s not like they wrestled away much,” Grant told Agri-Pulse. “Other than the low point of the trade war, they really didn’t come out ahead of where they were going into the trade war.”
And China is more important than ever to the U.S. ag sector.
“China imported a record $40.8 billion of food and agricultural products from the U.S. in 2022, up from $38 billion in 2021, and nearly twice the $22.6 billion China imported from the U.S. in 2017 prior to trade dispute and Phase One trade agreement,” Grant says in the study.
The key turning point was in January, 2020, when then-President Donald Trump and Chinese Vice Premier Liu signed the Economic and Trade Agreement between the Government of the United States of America and the Government of the People’s Republic of China, also known commonly as the “phase one” agreement.
While China did not outright lift its retaliatory taxes on the American Section 301 tariffs, Beijing did begin exempting its importers – many state-owned companies – from the tariffs. Much of the attention at the time was on soybean trade and while U.S. exports did climb, concern remained that the U.S. might not fully recover its pre-trade war market share.
“It was, ‘Oh, we’ll never get back the market share we once had,’” says Grant. “But we’re back in the game.”
Jim Sutter, CEO of the U.S. Soybean Export Council agrees.
U.S. soybean exports to China took a hit during the height of the trade war, and American exports have not completely regained the share of China’s imports they once held, but the recovery has been very strong.
China imported about 35% of its soybean needs from the U.S. in 2017, according to data provided by Grant. That dropped sharply in 2018 to just 18.5%. Three years later, the U.S. captured roughly 32% of China’s import needs in 2021. That slipped to 31% in 2022, but Sutter says the U.S. is exporting all of the soybeans that market conditions will allow.
“It really boils down to how much we have to export,” Sutter tells Agri-Pulse. “Look at the carryout. We’ve got a very tight carryout at the end of this year …. The market is doing its job of trying to limit exports because of this tight carryout and in fact we’ve had some imports to make sure we have an adequate supply.”
While the overall U.S.-China relationship may be fraught, the situation is good and getting better when it comes to soybeans, says Sutter, who was in China earlier this year on one of USSEC’s many trips there to meet customers.
A Chinese delegation is expected to arrive in August to take part in The Global U.S. Soy Summit that’s being held in New York this year.
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“I think we are enjoying a good relationship with Chinese soy buyers,” he said. “They want to be doing business with the United States and we want to be doing business with them … It seems to be a very popular thing these days to be a China-basher and I think we in agriculture need to do what we can to say, ‘Wait a second – not so fast. They’re our number one ag import market.’”
While U.S. soybean exports to China appear to have mostly recovered after the trade war, U.S. beef exports have exploded and added substantially to overall U.S.-China trade.
China lifted a 13-year ban on U.S. beef in 2017, but it wasn’t until the Phase One trade agreement that Beijing agreed to take down the major non-tariff barriers that continued to block shipments.
The Chinese agreed in the pact to lift their zero-tolerance policy on growth hormones, eliminate a prohibition on beef from cattle over 30 months old at slaughter, accept the U.S. traceability system, and make it much easier for U.S. packers to be approved for trade with the country.
“The improvements in market access enabled U.S. beef and variety meat exports to China to surge, from $86 million in 2019 to $1.59 billion in 2021, the first full year of expanded access and exports increased a further 35% to $2.156 billion in 2022,” the U.S. Meat Export Federation said in a statement given to Agri-Pulse. “The surge in exports to China means it is the third largest market for U.S. beef, after Korea and Japan. The competing bid from China helped support prices for all U.S. beef and helped to drive exports to a new record share of production and a new record value per head.”
There are plenty of types of beef exports to China that the U.S. just doesn’t compete in, so an overall beef market share – about 7% - doesn’t say much about U.S. exports. But when it comes to grain-fed cuts, U.S. exports captured about 72% China’s imports in the first six month of this year, according to USMEF.
