This is the second part of a three-part series on the impact of agricultural exports on the U.S. economy and the risks and promise for ag trade going forward.
The numbers are clear. In overall trade with the People's Republic of China — beyond just agriculture — the U.S. exported $147.8 billion to China in 2023. Meanwhile, we imported more than $427 billion. That’s a trade deficit of nearly $280 billion.
In agriculture, the scales are only slightly more even but trending in the wrong direction.
In 2023, the U.S. exported $33.7 billion worth of ag products to China, down from $36.2 billion in 2022, or about $38.3 billion when adjusted for inflation. USDA's Economic Research Service now projects that sales to China will fall to $23.3 billion in FY25, down from $25.7 billion in FY24.
“The Chinese have been clear that they are not anxious to import from the U.S. but will on the basis of need,” said Dan Basse, veteran market analyst and president of Chicago-based AgResource Co.
“It’s going to be more difficult to bring back U.S. ag trade than in prior episodes.”
By contrast, the U.S. imported less than $4.5 billion in agricultural goods from China last year. Also, as of this year, Mexico and Canada have moved ahead of China as the largest markets for U.S. farm products.
Modern trade between the U.S. and China began in earnest in 2000 when then-President Bill Clinton signed the U.S.-China Relations Act, which granted China permanent normal trade relations, or PNTR, after 14 years of negotiations. As part of the deal that allowed China to join the World Trade Organization in 2001, China slashed tariffs on agricultural commodities and gave foreigners import and distribution rights, opening a valuable export market for U.S. agriculture products and spurring bilateral trade.
With tariffs dramatically reduced by PNTR, agricultural exports to China grew steadily for more than a decade but bottomed out at $10.1 billion, or about $12.4 billion when adjusted for inflation, in fiscal 2019 after then-President Donald Trump imposed stiff tariffs on China. China responded with retaliatory duties on U.S. exports. China shut off buying large quantities of U.S. soybeans, among other things.
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The U.S. made a new agreement with China in 2020 (known as Phase One) that required China to make additional purchases of U.S. goods. Even though China hasn’t fulfilled all the requirements of that agreement, more robust trade resumed. Still, the entire kerfuffle caused China to look elsewhere for crops like soybeans, making inroads in countries like Brazil.
Now, some lawmakers in Congress are eager to strip China of its PNTR status, removing its access to reduced duty rates and imposing higher tariffs across all Chinese goods entering the U.S. Economists, however, have warned that such a move could cause significant economic damage, particularly to the U.S. agriculture sector.
And on the cusp of a second Trump administration, there also are concerns in the ag sector that President-elect Trump will impose new and additional tariffs on China, and across the world.
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During the campaign, Trump pledged a 60% tariff on all goods coming from China and an across-the-board 10% on all goods imported from any country.
Trump hasn't said since the election how he would carry out those campaign promises, but on Nov. 25 he announced he would sign a series of executive orders on his first day in office to impose new duties of 25% on all imports from Canada and Mexico and 10% added tariffs on goods from China.
He said those tariffs would remain in effect until the countries take steps to prevent the shipment of fentanyl to the U.S. from within their borders and, in Mexico and Canada’s case, to tighten border security and curtail crossing from undocumented migrants.
Farm groups continue making the case, regardless of administration, that exports are critical to U.S. agriculture.
“Ninety-five percent of the world’s customers live outside our borders,” said Andrew Brandt, director of trade policy at the U.S. Grains Council, which promotes U.S. grain trade, including corn, sorghum and barley and agribusinesses. “If we don’t do trade, we’re taking 95% of buyers out of the equation.”
Part 1 of Ag trade's uncertain future: Exports offer economic impact far beyond the farm gate
Instead, U.S. Grains promotes negotiating long-term trade agreements. “These have been very important,” said Brandt. “Our agreements with Mexico and Canada via NAFTA and more recently the USMCA are examples of both countries benefiting.”
A recent study found that if China pulled back from the 2020 agreement — in response to new U.S. tariffs — and reinstated the tariffs against the U.S. that have not been enforced, soybean exports to China could decline between 14-16 million metric tons annually for the next 10 years. That would be a decline in sales to China of more than 51%.
The study, commissioned by the American Soybean Association and the National Corn Growers Association, also found that corn exports to China would fall 2.2 million metric tons, a decline of 84% from baseline projections.
World Agricultural Economic and Environmental Services, which authored the study, found there is not enough demand from the rest of the world to offset the major loss of soybean exports to China. Brazil and Argentina would gain global market share with Brazil alone gaining 4.6 million metric tons of soybean and corn exports as the U.S. loses 2.3 to 3.7 million metric tons of exports annually.
China’s economy has slowed in recent years, which has impacted trade there. The country is also trying to focus on growing its own ag sector. These factors are on top of the geopolitical strains, economic tensions, and tariffs between the country and the U.S. — as well as others.
Additionally, China makes trade challenging through its own bureaucracy, according to Manuel Sanchez, the U.S. Grains Council’s director in China.
“China’s regulations and inspection procedures for agricultural imports can be challenging for exporters due to their complexity, frequent updates, and strict compliance requirements,” said Sanchez.
According to USDA’s Foreign Agricultural Service, incorrect labeling is the most common reason products do not pass customs in China. All U.S. food exports must include labeling in English, Chinese, or just Chinese.
Brazil stands to benefit from any U.S.-China trade conflict
Tit-for tat tariff escalations on U.S. and Chinese imports during Trump’s first term in office were a boon for U.S. agriculture competitors in the Chinese markets. And none benefited more than Brazil.
As Beijing slapped retaliatory tariffs on more than $22 billion in U.S. goods — including agriculture exports like soybeans, beef, pork and wheat — Chinese buyers turned elsewhere for agriculture commodities, and found Brazil a willing trading partner.
Over the past 10 years U.S. soybean production has remained relatively flat while Brazil has nearly doubled production, according to Bree Baatz, grain analyst with Terrain Ag, a market analysis firm created by AmericanAg Credit, Farm Credit Services of America, and Frontier Farm Credit. The Brazilian expansion, though, comes with the same challenges U.S. farmers face: lower prices and high input costs.
“Brazil will continue to expand, not at the same pace as the last 10 years,” said Baatz. Brazil does have a strategic alignment with China, with the latter country investing in Brazil’s infrastructure. “It’s hard to know what will actually happen but the U.S. has abundant grain available at competitive prices.”
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Brazilian soybean exports to China jumped after the imposition of Chinese tariffs and have continued to grow in the years since. Exports have almost doubled since 2017, with soybeans becoming the country’s primary agriculture crop by volume, according to research from the University of Illinois. In 2018, during the height of the U.S.-China trade conflict, China accounted for 82% of Brazil soybean exports, a peak which only slightly receded in 2023 to 73%.
Similarly, China has been increasing its purchases of Brazilian corn, cotton and meat. Brazil became the second-largest exporter of corn to the country in 2023, for example, overtaking Ukraine and trailing only the U.S.
China and Brazil recently announced 37 separate trade deals covering agriculture, technology cooperation, energy, mining, and other areas. As part of those announcements, Brazil will be able to export its sorghum, grapes, sesame, and fish products to Chinese buyers. In particular, the deal could greatly increase sorghum production in Brazil. Last year, China imported $1.83 billion in sorghum, mostly from the U.S.
The rapid and sustained growth in China’s agriculture purchases from Brazil, analysts say, represents a concerted effort to diversify sourcing and increase the country’s resilience to future trade shocks – such as a potential return to tariff escalations in a second Trump presidency.
“China is hedging its bets against trade actions by the U.S. on non-farm commodities, in order to essentially do what it did before, which was shut down close to — almost all — purchases of soybeans and to a lesser extent, corn, possibly wheat” said Vincent Smith, director of agricultural policy studies at the American Enterprise Institute.
Brazil’s exports of key U.S. agricultural commodities are also likely to increase as the country’s production expands. Safras and Mercado, a Brazilian agribusiness consultancy firm, recently raised its projections for Brazil’s 2024-2025 corn harvest and is now anticipating production to grow by some 7% next year. Similarly, CONAB, Brazil’s government agency responsible for monitoring agricultural production, estimates the country’s soybean production could jump by 13%.
Some of that crop growth has been enabled by deforestation and come at the expense of sustainability goals, according to Sandro Steinbach, an agribusiness professor at North Dakota State University.
“That's one of the big drivers,” Steinbach said, but added that the result is more cost-competitive Brazilian agriculture exports. “We lost that completely to Brazil, basically,” Steinbach added.
Additionally, in the pork sector, Brazil and China have been working on a deal to establish protocols for exporting pork offal, which would pave the way for more pork exports. Earlier this year, China also approved another 38 Brazilian meat facilities to begin exporting to the country, according to a statement from the Brazilian Presidency, bringing the total number of meat plants cleared for export to 144.
“China has made huge investments in the production of certain products, including pork, because China has an insatiable appetite for it,” Peter Friedmann, executive director of the Agriculture Transportation Coalition, told Agri-Pulse.
Brazil’s meat exports are also buttressed by Chinese investments in critical infrastructure in the country.
“There are some situations where the pork production is owned by China, the processing facilities are owned by China, the port at which the product is loaded on a ship is owned by China — or effectively owned — and then it goes on COSCO ships,” a Chinese state-owned shipping company, Friedmann said. “It's a pretty great deal, the way they've done it.”
Tariff threat hangs over U.S. export prospects
China is seen as hesitant to make stronger moves purchasing U.S. goods given Trump's threats to impose new tariffs on Chinese exports.
“The Chinese are not buying U.S. soybeans for January because they don’t know what the price will be,” said Basse. “They are willing to pay more money for the certainty of Brazilian soybeans.”
While there is a chance new tariffs could help get a better deal with China, there’s “a lot of risk involved in posturing,” said Tim Burrack, a northeast Iowa farmer who has served on the board of the U.S. Grains Council. “We’re going to lose all that pork they [China] buy from us and in five years they’ll be buying it from Brazil,” he says.
Given the recent announcements of numerous trade deals between China and Brazil, Burrack’s outlook is pessimistic. “I don’t think we’ll get China back,” said Burrack, “because Brazil can produce what China wants and won’t piss them off. We’ll be in a tariff war with them.”
That view, of course, isn’t universal. “I don’t know that all is lost there,” said Kyle Mehmen, another Iowa farmer who traveled to China and several other countries a decade ago. His impression from his visit to China — and in what he’s seen in the years since — is that they are more likely to respond to the stick, rather than a carrot.
Tariffs put on by the U.S. during the last administration brought the Chinese to the bargaining table and resulted in the Phase One agreement, according to Mehmen. “That’s when action really happened,” he said. While China didn’t uphold everything with all of its commitments, a good portion of ag trade with them returned.
China has specifically been focusing on markets other than the U.S., according to Ben Conner with DTB AgriTrade, a trade policy consulting firm. “Nobody wants to give up on China by any means,” said Conner. “But it has its own set of challenges beyond the traditional trade policy tool set.”
“Every commodity has had some laundry list of trade policy problems with China … barriers of some type,” says Conner.
“The big one that goes back years has been biotech,” says Conner. “A company will develop a new crop trait, get it approved through the process, then have intellectual property protection.” But China will then “slow walk” that trait’s process in their own approval process, shaving by years the amount of time a company will be able to profit from that trait in that China, according to Conner.
“So a company ends up with this great trait sitting in greenhouses that they can’t get into farmers’ hands,” said Conner.
The Chinese government has also used food safety “scandals” in the U.S. to restrict imports of products, according to Conner. “Their own milk contaminations have, in some cases, driven demand for imports because people in China sometimes don’t trust Chinese products,” he said. “Still there is a lot of caution about letting U.S. products in the country but it isn’t necessarily science-based caution.”
Friedmann of the Agriculture Transportation Coalition believes that the United States can win back and maintain agricultural trade with China by staying in the game with high-quality, reasonably priced goods.
“The people in China who are buying from the U.S. are buying for a reason,” said Friedmann, “and they want to keep buying from the U.S. And those interests continue to lobby their government to not restrict their ability to buy their preferred product, which are U.S. products.”
p.p1 { margin: 0.0px 0.0px 0.0px 0.0px; font: 12.0px Helvetica }Individual businesses and industries in China have lobbied the central government and local officials to rescind or limit China’s tariffs, according to Friedmann. “They do it in a way that is far less public than ours,” he said. “Sometimes goods get sent through for export with no tariff and we don’t know exactly what happened.” But China does have trade associations that try to influence decisions.
“You start with this fundamental thing,” said Friedmann. “The only reason we are sending something over there is because someone there wants it and is paying for it. They may not put notices in a Federal Register and have lawyers walking around but they are still organizing and lobbying.”
Next week: A look at the countries that offer the best prospects for boosting markets for U.S. farm commodities.
Midwestern states would bear the brunt of a new trade conflict
President-elect Donald Trump has floated an across-the-board tariff that would increase duties on U.S. imports from every trading partner, alongside specific tariff threats on Chinese, Mexican and Canadian imports.
If he follows through with the campaign rhetoric and blankets U.S. imports with new duties, retaliatory tariffs from trade partners could rock the agriculture industry in U.S. states heavily dependent on exports.
North Dakota and Illinois are both reliant on export markets for more than 45% of their agriculture revenues. So are Louisiana and Hawaii — although the latter only has a small agriculture sector. Accordingly, these states' ag sectors are particularly vulnerable to trade shocks and would bear the brunt of any retaliatory tariffs or trade frictions.
China’s response to tariff escalations during Trump’s first term were targeted to hit Republican states that made up Trump’s electoral base. Beijing slapped new tariffs on U.S. soybeans, beef, pork, wheat, corn and sorghum, resulting in a loss of some $27 billion in U.S. farm exports, according to the Agriculture Department.
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Sandro Steinbach, an agribusiness and applied economics professor at North Dakota State University, told Agri-Pulse that any subsequent tariff escalations would likely prompt a similar response in Trump’s second term, given Beijing could simply end the tariff exclusions implemented under the phase one deal to reinstate the tariffs.
“Any of those policy shocks will be really, really painful,” Steinbach said.
North Dakota, which Steinbach said exported around 94% of its soybean crop this year to China, would be particularly hurt. Soybeans, which are the largest U.S. agriculture export to China, also account for around 40% of Illinois’ farm exports, leaving the state's farmers heavily exposed to Beijing’s retaliatory tariffs.
In research published in September, Steinbach and his NSU colleagues examined state-level export losses from 60% retaliatory tariffs on U.S. wheat, corn, soybean and beef exports to China and a 10% tariff applied to exports to all other countries — in line with the rates Trump floated during the campaign. Under such a scenario, Illinois would suffer the largest export losses of any state. Its soybean sector alone could lose foreign markets worth in excess of $2.3 billion, almost half of the state’s total soybean exports, with a further $672 million coming from lost wheat exports.
North Dakota, meanwhile, could lose more than $1 billion in combined soybean and wheat exports, around a third of its total exports in both crops.
Even if tariffs are limited to Canada, Mexico and China — the countries Trump has threatened with new tariffs since the election — the Midwestern states would suffer large export losses.
In forthcoming research, Steinbach and his colleagues examine the effects of a 25% retaliatory tariff on U.S. agriculture products destined for Mexico and Canada and a 10% tariff on shipments to China. Under this scenario, Iowa faces the heaviest losses, followed by Illinois, Nebraska and Minnesota — all major soy-growing states.
“If everything comes through as discussed right now or as threatened, then this … will be changing how we do agriculture in America, to be very frank,” Steinbach said.