Trade wars cost US, China billions of dollars each in 2018

The Us-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 specialized industries including US soybean crushing benefited from the dispute, it had an overall detrimental impact on both of the world’s two largest economies.

The losses may give US President Donald Trump and his Chinese counterpart, Xi Jinping, motivation to resolve their trade differences before a 2 March deadline, although talks between the economic superpowers could still devolve. The US and Chinese economies each lose about $2.9 billion annually due to Beijing’s tariffs on soybeans, 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 soybean importer and last year relied on the United States for $12 billion worth of the oilseed.

China has mostly been buying soy from Brazil since imposing a 25% tariff on American soybeans in July in retaliation for US tariffs on Chinese goods. The surge in demand pushed Brazilian soy premiums to a record over US soy futures in Chicago, in an example of the trade war reducing sales for US exporters and raising costs for Chinese importers. “It’s something that’s crying for a resolution,” Tyner said. “It’s a lose-lose for both the United States and China.” Total US 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 US Department of Agriculture.

The most actively traded soybean 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.

As of 28 December, futures in the last month of the year were averaging $8.95-1/2 a bushel. That was down from $9.61-3/4 for all of December last year.

To compensate suffering farmers, the US government has allocated about $11 billion to direct payments and buying agricultural goods for government food programs, after consulting economists, including Tyner. In North Dakota, which exports crops to China through ports in the Pacific Northwest, soy 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,” Watne said.