Soybean Exports: US-China Tariff, again!

I recently travelled back to the US to visit family and the county in Maryland where I spent the majority of my life is fairly rural. The county has developed significantly due to its proximity to Washington, D.C., but my family home is still surrounded by family farms. Some of the nearby homes have enough property to grow their own vegetable gardens, another farm was recently converted into cultivating hemp, but the majority of the farms rotate corn, wheat, and soybeans. When I was running errands, I noticed that the soybeans had not been cut down for the season. I found it very strange that this had not happened yet in mid-October because this is usually the time that winter wheat is planted to prevent soil erosion. My local farmers are quite consistent on land rotation and maintaining soil health, so this bizarre behaviour piqued my interest. I needed to understand why soybeans were unploughed and it turns out that soybean farmers are again a victim of the tariff war between the US and China.

The Trump Administration 1.0, in its first attempt to balance trade relations with China, initiated a trade war with China and hiked tariff rates by 25 percentage points on $50 billion worth of commodities and by 10 percentage points on $200 billion worth of commodities imported from China. Many of the products that were hit with tariffs included washing machines and solar panels, but also important metals like steel and aluminium. China understands how important these items are commercially and economically to many industries in the United States, but retaliating politically will also be beneficial in this trade war. So the Chinese turned to the agriculture sector by raising the tariffs on soybeans. Where most farm country resides is in Republican strongholds, like Iowa, who have enormous influence in elections as they are one of the first states to illustrate what the conservative voter is thinking. Understanding this process in prior to the 2018 Congressional election, China’s retaliatory tariffs coincided with Republican-leaning counties, largely because these counties tend to be rural and the Chinese tariffs were large in agriculture. The impact of the soybean tariffs during this time was a significant decrease. The American Soybean Association estimates that the U.S. shipped an average of $12.8 billion worth of soybeans to China per marketing year. During the trade war, that value shrank to $4.7 billion in 2018/19 and $5.8 billion in MY 2019/20. In an attempt to maintain power in Congress, the Trump Administration tasked the Agriculture Department to create a $12 billion government aid package to help the farmers that were impacted by the tariffs. The spike of tariffs on China eased after 2019 and the subsequent Biden Administration allowed the expiration of many tariffs, the farmers were able to adjust and maintain agricultural trade relations. But then the Trump Administration returned to the White House in February 2025.

This round of the US-China tariff war is seeing both sides dig in deeper and raise the taxes higher. For the United States, the aim is trade balance as the current administration is interested in this theory throughout the world. For China, the retaliatory tariffs are targeted on agricultural items, especially soybeans, and Beijing has insisted that the administration first drop the 20% tariff the U.S. has imposed over China’s role in the fentanyl trade before any ease of tariffs on soybeans. This has priced US soybeans out of the Chinese market and making it too expensive for US farmers to harvest. The American Soybean Association broke down the following tax implications:

“The combination of 20% retaliatory tariffs as well as VAT and MFN taxes have pushed China’s overall duty rate on U.S. soybeans to 34% in 2025. While the new retaliatory rate is 5% lower than during the 2018 trade war, the added retaliatory duties will keep U.S. soybean prices prohibitively more expensive than South American soybean supplies ahead of U.S. harvest this fall.”

The ones who stand to benefit from this trade war are Brazil and Argentina as Chinese importers have booked around 7.4 million metric tons of mainly South American soybeans for October shipment, covering 95% of China's projected demand for the month and 1 million tons for November. The US Agriculture Department has estimated that China has placed ZERO orders for US soybeans for the current harvest year. This has a lot of downstream effects on the agriculture economy when farmers are unable to export their crops. Other economic issues such as rising costs for equipment, fertilizer and other materials are also crimping profits. U.S. soybean farmers are estimated to lose roughly $100 an acre this year. Again, this has led the Trump Administration to look for new ways to supplement the farmers impacted by this trade war by using the revenue from the tariffs to the amount of ten to fourteen billion dollars in aid. 

There is no doubt that this trade war has an impact on regular people, I have seen it with my own eyes, but that does not mean that it is a widespread issue that impacts everyone collectively. How much impact this actually has on the United States economy is fairly minimal as the agricultural sector only accounts for 5.5% of the total GDP of the United States. The issue is much more of a political one as the family farmer is a crucial part of American identity. This groups of people also include a loud and large portion of the US Republican party base, which China seems to understand this dynamic fairly well. With the upcoming trip to Asia this week and the anticipated meeting between Trump and Xi, the trade war might move in any direction.