President Donald Trump’s trade war with China could cause long-term damage to U.S. farmers, as producers from other countries establish relationships with Chinese importers and take over more of the country’s markets.
A report from the Boston Consulting Group, released on Wednesday, warned that Trump’s trade policies could hurt the agricultural industry far beyond the end of the tariff war.
“The growing risk is that much of the market share abroad that U.S. agribusiness is losing to foreign competitors will be hard, if not impossible, to win back — even if current trade conflicts are resolved to the U.S. government’s satisfaction,” the report said.
“The longer the trade wars drag on, and the uncertainty over US trade policy persists, the more time rivals will have to build the production capacity, distribution infrastructure and deep-rooted relationships with importers they will need to erode the competitive advantage that US suppliers have built over decades.”
The report provides credence to the concerns of some farm groups, like the Illinois Farm Bureau, which has been warning that Trump’s trade policies are eroding old relationships with Chinese producers and could cause damage that persists even after the conflict is resolved.
Brazil and Australia have ramped up cotton exports to China, as the U.S. share of the market decreases. Brazil has also helped fill the void created by the retreat of U.S. soybean exports to China. Beijing’s policies are also helping foster better relationships with producers from other countries. Although China has retaliated against Trump’s tariff escalation by levying its own, Beijing is also lowering tariffs against the rest of the world.
Agricultural sector growth in 2018 and the beginning of 2019 has showed the impact of Trump’s trade policies, BCG said. Last year, U.S. agricultural trade registered its lowest surplus in over a decade, according to statistics from the U.S. Department of Agriculture. Exports have declined 4 percent over the first eight months of 2019, when compared with last year’s levels, The Wall Street Journal reported.
Trump’s 2017 withdrawal from the Trans-Pacific Partnership has also hurt U.S. producers, the report said, noting that the other 11 nations involved in the TPP concluded their own trade agreement.
The agreement puts some U.S. farmers, like beef producers, at a disadvantage. Japan’s tariffs on beef imports from members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the replacement agreement, have been far below those levied against imports of U.S. beef. This week, Japan and the U.S. finalized a trade agreement that addresses some of the disadvantages created by the U.S. withdrawal from the TPP.