The U.S. on Wednesday vowed "to defend" American soybean producers against possible Chinese trade action as fears of a trade war loomed over the nation's agriculture industry.
China's Global Times, the ruling Communist Party's official newspaper, said in an editorial that "the Trump administration has repeatedly accused China of violating international trade rules and threatened to impose higher tariffs on Chinese products. But the U.S. is actually the breaker of WTO rules, which can be seen clearly by how subsidized U.S. soybeans are dumped on China."
With the editorial, "the Chinese are hinting that they are going to restrict soy as part of an anti-dumping proceeding," said Daniel Ikenson, director of trade policy studies at Washington-based Cato Institute, the libertarian think tank.
The Chinese media attack on U.S. agriculture comes as President Donald Trump is expected Thursday to announce up to $60 billion in annual new tariffs against Chinese goods as part of clampdown on Beijing's intellectual property theft. Administration officials have previously estimated that China's theft of intellectual property could cost the U.S. economy up to $600 billion annually.
China's big soy demand
China is the world's top buyer of soybeans, using most of it for soy protein to feed roughly 700 million pigs in the country or to make cooking oil. The U.S. ships about $14 billion worth of the commodity annually to the Asian nation, according to the U.S. Department of Agriculture.
"The United States stands ready to defend our producers that may be harmed by foreign country retaliation, in particular farmers and ranchers who are often the first to be targeted by trade actions," a USDA representative said in an email response following the Chinese nationalist tabloid's editorial.
"There is a reason the United States is the world's largest soybean producer, and one of the top exporters: we are great at growing soybeans," the official added. "There is a reason China is not a big producer and a major importer: it is not competitive."
China's 'distortionary support'
The USDA spokesperson also said that even with China's domestic soybean prices that are well above world prices as a result of "distortionary support programs," the Chinese still can't keep up with domestic demand and therefore must rely on imports. "Any suggestion that imports of U.S. or South American soybeans are unfairly traded or causing some injury to China is not justified by the facts," the official continued.
At the same time, the USDA official said the Chinese has been told the facts previously and that U.S. still holds out "hope rumors of unjustified trade remedies are not thinly disguised protectionist actions."
According to the Chinese op-ed, "Strong restrictive measures need to be taken against the massive subsidies and dumping of soybeans by some countries on China. This can reduce the adverse effects of imported soybeans on the Chinese market and provide a fair and sound environment for the sustainable development of the Chinese soybean industry."
$20 billion at risk
Besides buying American-grown soybeans, China also is a large buyer of other U.S. agricultural products, including course grains, hides and skins, as well as pork and cotton. Overall, U.S. agricultural exports to China represent about $20 billion annually for American farmers.
Earlier this month, Trump unveiled a 25 percent duty on steel imports and 10 percent charge on aluminum imports, essentially targeting foreign suppliers such as China. In taking the action, the administration said the two industries "are vital to our national security."
Agricultural executives say American farmers also could end up getting squeezed by those imported steel and aluminum tariffs since the metals are used to make everything from farm machinery and equipment to steel storage bins and metal sheds used for housing livestock.
The U.S. farm sector is already struggling with low crop prices and is expected to post another year of declines in net farm incomes.
"If this keeps going on, we're going to start losing farmers," said John Heisdorffer, a farmer from Iowa and president of the American Soybean Association. "We sure can't lose our exports — that's one of the few things we have."
Fear of 'tremendous impact'
American farmers in the Midwest, a region where Trump's base helped get him into the White House, are well aware Chinese trade retaliation could hurt them.
"It has the potential to have a tremendous impact," said Brent Bible, an Indiana farmer who grows soybeans and corn. "When you think about the fact that China is the No. 1 importer of U.S. soybeans and related products, any action that they would take would have a negative market action."
China buys roughly half of the U.S. soybean exports, and roughly 1 in 3 rows of beans grown on the nation's farms goes to the world's second-largest economy, according to the American Soybean Association. Illinois is the top state for soybean production, and Iowa, Minnesota, Indiana, Nebraska, Ohio and Kansas are major producers.
However, China has other options when it comes to importing soybeans, including going to South America.
Competition from South America
"China could shift their supply chains to other markets such as Brazil and Argentina," said Sherman Robinson, research fellow at the International Food Policy Research Institute, a Washington-based think tank and research group. He said it would force the U.S. to find other customers for soybeans, but it still would "be a big hit and it would take time to do any adjustment in the market. It would be serious damage to U.S. soybean producers."
Still, a persistent drought has been a concern in soybean-growing areas in Argentina and prompted some estimates the country will have its lowest crop in six years.
Meanwhile, the U.N. Food and Agriculture Organization estimates Brazil will overtake the United States as the world's largest soybean producer in the coming decade. Together, the U.S. and Brazil represent about 80 percent of the global exports of soybeans.
Beijing's previous threats
Last month, a trade official in China's commerce ministry reportedly threatened that it would retaliate against possible tariffs and called any such levy foolish. "The spectrum of national security is very broad and without a clear definition it could easily be abused," said Wang Hejun.
"If the final decision from the U.S. hurts China's interests, we will certainly take necessary measures to protect our legitimate rights," Wang added.
In fact, China took trade action against some U.S. agricultural products last year, including anti-dumping and anti-subsidy duties on U.S. imports of distillers' dried grains, a corn-based ethanol byproduct used for animal feed.
Then, last month the ministry announced an anti-dumping probe into U.S. imports of sorghum, a cereal grain used mostly for feed and ethanol. The Chinese investigation is seen as largely a warning to the Trump administration but it could lead to tariffs and could hurt sorghum-producing states, particularly Kansas, Texas, Colorado, Oklahoma and South Dakota.
Regardless of what happens with China, there's still risk of impacts to U.S. agriculture from Canada and Mexico if the Trump administration withdraws from the 24-year-old North American Free Trade Agreement. Mexico and Canada together represent nearly one-third of total U.S. agricultural exports.
