OTTUMWA — America’s potential trade war and soybean exports from Brazil to China could mean trouble for Iowa soybean farmers.
Wendong Zhang, assistant professor in the department of economics at Iowa State University, said China is an indispensable trade partner. America receives $14 billion from soybean exports alone, but a trade war could have a negative effect on soybean trade and local farmers.
“If soybeans are retaliated against, there is a direct correlation to Iowans through price and market discovery,” said Mark Jackson, previous director of the Iowa Soybean Association. “But whole soybeans are just as important to China’s economy as to ours; they have growing hogs and chickens which need protein and soy oil for cooking, though China maintains large soybean inventories.”
Local farmers are unsure where China’s retaliation will strike. New developments in China have leaders and trade members uneasy.
“Kind of unfortunate but interesting timing,” said Zhang. “This week China essentially changed their constitution to remove the two-term limit for the Chinese president.”
The change brought a power play, according to Zhang. He said the Chinese government has a diverse range of trading partners to have the opportunity to shop for the best prices. Due to this, America’s share of trade with China is declining.
“I don’t expect a major disruption or to suddenly announce a stop to exports,” Zhang said. “But I do think it’s moments like this that show how agriculture heavily relies on trade and is highly competitive in the global market.”
Despite Zhang’s assurance, there is still cause for concern. If a significant amount of trade is stopped by President Donald Trump’s trade tariffs, agricultural trade will be open to retaliation.
“China is well-known to protect its own whether through (IPR) Intellectual Property Rights infringements, currency manipulation or total restriction of social media providers other than their own (Baidu vs. Google), to name a few,” Jackson said. “Someone always loses short term.”
Jackson and Zhang agree there have been limits and regulations to past retaliations. But political factors make the 2018 tariffs different than past issues.
“It all will depend on trade tensions,” said Zhang. “History would tell us it is more rhetoric than actual frictions, but now it is a little more unpredictable.”
Zhang said not to worry too much. The tension opens the door for China to lean more toward Brazil’s soybean trade along with Argentina and Uruguay. However, they cannot supply the demand, and Zhang said this should secure a space for American soybean trade.
“All U.S. farmers and agriculture people in the industry should stand up for trade,” Zhang said. “We excel in production and exceed the amount we need here at home. Almost all sectors of agriculture (grain, corn and soybeans) are heavily dependent on trade.”
Jackson also said keeping peaceful trade is important because solar panels, sorghum and soybeans could be part of trade ban discussions. Halting those trades would be detrimental to U.S. markets.
“The farming community is watching with trepidation that we are not drawn into the fray, nor that the WTO apply sanctions as well,” said Jackson. “However, with Iowa’s former Governor Branstad, current ambassador to China, and Secretary of Ag Perdue and even with Iowa Soybean’s China delegation soon to travel to China, maybe the Trump administration will play this differently than his predecessors.”
Aaryn Frazier can be reached at email@example.com or on Twitter at CourierAaryn.