Economic professor shares analysis of new U.S.-China trade deal

During the first Field to Finance Seminar, economics professor and trade expert shares findings about what impact the recent Chinese trade dispute has left on the Iowa and U.S. economies, as well as what the new trade deal would mean for farmers

Posted: Feb 12, 2020 1:15 AM
Updated: Feb 12, 2020 9:48 AM

GREENE, Iowa - U.S. farmers have paid a steep brice during Washington's months-long trade war with Beijing, losing almost 2/3rds of their exports to China.

Scott McGregor has been growing corn and soybeans, as well as raising beef cattle, in rural Chickasaw County since the early '80s, and was in China meeting with the Beef Industry Council and the U.S. Meat Export Federation mere days before the Chinese tariffs on U.S. goods went into effect. Meeting with diplomats there, they told him there needed to be a change when it came to trade. 

"The tariffs that the U.S. has to pay was unfair. We needed to level the paying field because our competition, being Australia and New Zealand, other importing countries, were paying much less tariffs."

He's heard from his fellow farmers, who have been dealing with struggles of their own.

"It's been pretty hard the last few years, just trying to make ends meet. With the budget, fluctuation in commodity prices, whether it be the proteins or the grains. It's been up and down and difficult because of the trade issues."

But the U.S. China Trade Deal signed last month may bring some relief. In January, President Trump and Chinese leaders agreed to a new deal that consists of relaxing some tariffs imposed on Chinese and U.S. imports, as well as China agreeing to buy more American products.

With the new deal, he's optimistic.

"Maybe in a couple years, things can get stabilized a little bit."

During the Field to Finance Agriculture Seminar at the Greene Community Center on Tuesday, Iowa State Economics Professor Wendong Zhang shared his findings and analysis of what the trade dispute has lead to, as well as what 'Phase 1' of the trade deal could mean in terms of getting back on track.

"The trade war situation is really significant because the Chinese retaliation targets is mainly geared towards the agriculture sector. We have estimated that the Iowa economy will lose $1-2 billion from the trade war."

"This represents the first time both countries actually made a move that lowered the tariff rate rather than keep escalating it."

He feels the deal will be beneficial.

"Rather than seeing about $22 billion of agricultural exports from the U.S. to China annually, we expect to see $35-40 billion annually in the next two years."

Because of the trade dispute with the U.S., China has had to change strategies and open up new trading piplines.

"They want to ramp up domestic soybean production. They are buying a lot more from Brazil, they're in negotiation with Argentina to see whether they can buy whole beans rather than soybean meal, and they are trying to form stronger trade relations with Serbia and Russia as well."

Despite increasing competition from places like the aforementioned countries, Zhang believes that China will continue to buy U.S. imported goods, particularly in proteins and consumer-oriented goods like vegetables, nuts and wine, due to the rise in household incomes.

"I do see the portfolio will be much more different."

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