THE IMPACTS OF CHINA-USA TARIFF DISPUTE ON AGRICULTURE AND ECONOMIC DEVELOPMENT

 

 

 

 

 

 

THE IMPACTS OF CHINA-USA TARIFF DISPUTE ON AGRICULTURE AND ECONOMIC DEVELOPMENT

 

Andrew Grant

Date:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Abstract

The U.S has recently introduced tariffs on Chinese products, causing an array of effects. This project purposes of highlighting the impacts of such developments to the economies of these two countries regarding Agricultural sectors. The researcher will conduct a review of related literature to establish these effects. The study will conclude that the current trade dispute between the U.S. and China has negatively impacted the U.S. agricultural sector and will likely continue to do so in the future. U.S. tariffs imposed on China, including those for alleged unfair trade practices, are self-defeating and have resulted in China imposing large retaliatory tariffs on U.S. agricultural exports. Due to this trade dispute, American farmers and ranchers are at risk of losing important trading relationships and opportunities in China.

The study suggests that any alleged unfair practices should be addressed at the World Trade Organization using the dispute-settlement process, a process that the U.S. has used very successfully in the past. The U.S. should fight to reduce trade barriers so that American farmers and ranchers can have access to new customers all over the world, and American families can have access to a greater variety of agricultural products year-round.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Introduction

The United States and China are an essential part of world trade. China is a vital source of steel, aluminum, and other technological products to the US. The United States is also a significant source of many agricultural products to the Chines economy. Currently, these two countries are in the midst of a significant trade dispute, with the U.S. imposing tariffs on Chinese goods, and China is responding with retaliatory tariffs on American goods. For instance, the US government applied tariffs to exclusive Chinese products worth US$250 billion.

On the other hand, the Chinese government applied tariffs to exclusive US goods worth US$110 billion. However, there has been some hope that current negotiations between the two countries could help to put an end to this tit-for-tat dispute, but to date, it remains very much alive. This study will endeavor to address the impacts of the current trade war between the two world major economies to their respective agricultural sector and offer possible solutions to mitigate such damages (Daren Bakst, Gabriella Beaumont-Smith and Riley Walters, 2019).

 

Research Question

The study will address the following as the primary research question.

What are the significant impacts of China-USA tariff dispute on the agriculture sector and economic development of China and the U.S.A?

The study will use the following guiding question to aid in the answering of the main study question.

What is the current status of the China -U.S trade war?

What measures have been taken by the U.S on Chinese products?

What retaliatory measures has the Chinese government put in place to counter the U.S.A imposed tariffs on the Chinese products?

What measures could be used to eliminating the harm resulting from the trade dispute, while addressing any legitimate concerns over China’s trade practices?

 

 

 

 

 

 

 

 

 

 

Literature

This section will provide an overview of the U.S.–China Trade Dispute, its current status, and finally its impacts on the Agricultural sectors of the two countries. Trade tensions between China and the U.S have been existing but recently worsened during late 2017 and early 2018 when the government of China increased tariffs on Sorghum imposts from the United States by 25% when the U.S made consideration of increasing tariff on Chinese steel and aluminum imports to the U.S.

According to, the economic consequences of these tariffs could be significant, considering that the United States exported almost 10 million tons of sorghum worth around $2 billion to China in 2016 and 2017 and considering that China is America’s largest customer for agricultural products (Daren Bakst, Gabriella Beaumont-Smith and Riley Walters, 2019).

 

Overview of the U.S.–China Trade Dispute

The United States government used the following legal provisions to impose tariffs on Chines products. Section 201 of the Trade Act of 1974. This affected washing machines and solar products on the premise that they cause injury or threat of serious harm to domestic industries in the U.S.A to a greater magnitude. The second section is Section 232 of the Trade Expansion Act of 1962, which addresses the issues and concerns of national security. On this basis, the U.S. imposed tariffs on aluminum (10 percent) and steel imports (25 percent) for the very first time. And lastly, the Section 301 of the Trade Act of 1974 which bases on which try to address the USTR allegations of “China’s unfair trade practices related to the forced transfer of U.S. technology and intellectual property.” worth (Dallas, 2019).

In retaliation to the Section 232 tariffs and Section 301 tariffs, China instituted retaliatory tariffs on U.S. exports, including agricultural exports. According to The Congressional Research Service (CRS), the Chinese government “has levied retaliatory tariffs on about 800 U.S. food and agricultural products that were worth about $20.6 billion in exports to that country in 2017.” worth (Dallas, 2019).

 

 

U.S. Agricultural Trade with China

In the US, many farmers and ranchers produce more goods that exceed the local market necessitating international agricultural trade. The free business makes it possible for them to find customers outside the U.S. for their production and to expand into new markets. One such market is the Chinese market which has for long been a critical agricultural trading partner after Canada, which totals to about 14 percent of total U.S. agricultural exports. American consumers, for their part, benefit from agricultural trade by having access to a more significant number of agricultural products throughout the year. Products that may have once been seasonal can be purchased throughout the year, and the increased supply can help to reduce consumer costs. The Chines economy also supplies the US economy with agricultural products. China ranks fourth in the list of suppliers of agricultural products to the U.S. For instance, in 2017, the agricultural imports from China to the U.S we about $4.3 billion in worth (Dallas, 2019).

 

 

The Trade Dispute’s Harmful Impact on Agriculture

The impacts of this trade dispute will not only be for the moment but will also have a residual effect on the two economies. Currently, this dispute risks losing essential opportunities in the critical China market for American farmers and ranchers and, as the conflict continues, the costs will likely become more significant. Reports have also revealed that important U.S. agricultural exports, such as pork products (50 %), sorghum (25 %) and soybeans (25 %). The retaliatory tariffs by the Chinese government will make it more difficult for U.S. producers to sell these products in China. As a consequence, China will also drop the current second importer of Chines Agricultural products to the fifth. In the long run, there is a possibility that there could be long-term damage to U.S. soybean sales to China (Emily Moon, 2019.).

The trade war has caused farm bankruptcies. The U.S farmers take loans to cover operation costs; the latest results reports have shown that the farmers have a problem paying back the loans; some have even been pushed out of business. According to (Alexia, 2019), a total of 84 farms in the upper Midwest filed for bankruptcy between July. Farms that produce corn, soybeans, milk, and beef in the U. S were already feeling the impacts of the trade war that have caused low global demand and therefore, low prices.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Method

This segment was utilized to clarify the approach that the research adopted in answering the research question. As such, the study will adopt a review of related literature, especially the journals and online sources. The study also used library sources like journals, conference proceedings, desperations, and thesis. The examination study will cover the two nations; the USA, as well as China, trade wars strategies with specific target on the impacts on the Agricultural aspects of the economy.

As prior expressed, the information will be gathered by the utilization of the online resources and public library resources. Because of the trade war is very recent, there are limited data and information regarding this subject, the circumstance made the required credible data considerably tough to obtain. The researcher, however, made the research extensive to bridge the information gap.

After the data gathering process, the experts will perform analyzed it for honesty and regularity. The appropriate actions given by the participants were much examined using finishing an assessment procedure. Basic diagrams were utilized to speak to the information, and this empowered the specialist to make discourses and ends as well as exchanges of the investigation concerning the model and the goals in part one.

 

Conclusion and Recommendation

The study shows have illustrated that, due to this trade dispute, American farmers and ranchers are at risk of losing essential trading relationships and opportunities in China. The study suggests that any alleged unfair practices should be addressed at the World Trade Organization using the dispute-settlement process, a process that the U.S. has used very successfully in the past. The U.S. should fight to reduce trade barriers so that American farmers and ranchers can have access to new customers all over the world, and American families can have access to a greater variety of agricultural products year-round. The following recommendations can be taken by the American government to help solve the current stalemate. For example, the U.S government should make More Frequent Use of the World Trade Organization’s (WTO) Dispute Settlement System.

Admittedly, eliminating tariffs does not help the U.S. to address China’s alleged unfair trade practices. To address unfair practices, the United States should use the WTO dispute-settlement system instead of relying on tariffs. One of the most important benefits of the WTO is having a legal venue to challenge foreign trade barriers. Even though the WTO settlement system is not without flaws, it is a much better avenue to resolve disputes than to hurt Americans through tariffs.

As reported by (Alexia, 2019), the U.S government should stop Compounding the Harm from Tariffs by Providing Special Aid to Farmers. This avenue is misguided as a response to the self-inflicted damage as a result of tariffs posed by the U.S. This problem is not restricted to only farmers but has a trickle-down effect that affects consumers through import taxes on goods that result into high prices. The taxpayers are also pain by paying billions of dollars in aid. The U.S industries are constituting of small businesses also feel the harmful effects of the trade dispute.

The U.S government should also Promote Freedom to Trade. This will ensure that individuals and businesses are free to exchange goods and services with customers voluntarily. As a general principle, farmers and ranchers from different countries, just like other businesses, should be able to enjoy the freedom of selling their products to customers globally without barriers. Additionally, the consumers should also be at liberty to purchase goods and services that best meet their needs, irrespective of national origin. Government-imposed barriers, such as tariffs, undermine these freedoms. As the U.S. works through trade challenges with China, this principle of freedom to trade should be front and center (Alfred, 2019).

 

 

 

 

References

 

Alexia Fernández Campbell., May 17, 2019., Farmers are losing patience with Trump’s trade war “We don’t want another check from the government.”. [online]. Retrieved from: https://www.vox.com/policy-and-politics/2019/5/17/18626664/farmers-trump-trade-war-china. [Accessed July 11, 2019]

Alfred Roman., 10 May 2019., China’s economy is less reliant on exports than it once was, and could boost trade with other countries, experts say. [online]. Retrieved from: https://www.aljazeera.com/news/2019/05/trading-punches-china-absorb-trump-latest-tariff-blow-190510120108019.html [Accessed July 11, 2019]

 

Dallas Wood., 2019., USDA Trade Impact Model: Calculating the Effects of Agricultural Tariffs Providing reliable, efficient tariff projections for the public- and private-sector stakeholders [online]. Retrieved from: https://www.rti.org/impact/usda-trade-impact-model-calculating-effects-agricultural-tariffs. [Accessed July 11, 2019]

Daren Bakst, Gabriella Beaumont-Smith, and Riley Walters., February 28, 2019., The U.S.–China Trade Dispute Affect U.S. Agriculture: What You Should Know. [online]. Retrieved from: https://www.heritage.org/agriculture/report/how-the-us-china-trade-dispute-affects-us-agriculture-what-you-should-know. [Accessed July 11, 2019]

Emily Moon., FEB 5, 2019., How the trade war has affected American farmers [online]. Retrieved from: https://psmag.com/news/how-the-trade-war-has-affected-american-farmers. [Accessed July 11, 2019]

Tom Polansek, P.J. Huffstutter, Humeyra Pamuk., May 10, 2019., U.S. plans more aid for farmers amid China trade spat. Business news., [online]. Retrieved from: https://www.reuters.com/article/us-usa-trade-china-farmers/u-s-plans-more-aid-for-farmers-amid-china-trade-spat-agriculture-secretary-idUSKCN1SG1JX [Accessed July 11, 2019]