After President Trump enacted tariffs against their goods, the Chinese government responded with $34 billion in retaliatory tariffs. Among the US goods hit by these tariffs were soybeans, which before the tariffs enjoyed a lucrative export trade in China. The market after the tariffs, however, has been a different story. Before the tariffs, in the first seven weeks of the 2017-2018 marketing year, the US exported 239 million bushels of soybeans to China. In the first seven weeks of the 2018-2019 marketing year, that number cratered to 7.4 million bushels. This decline constitutes a whopping 97% decrease in US soybean exports to China, and the carry-on effects of the decrease have devastated domestic markets.
Before the institution of the tariffs, China was the biggest buyer of US soybeans. The People’s Republic bought $12.5 billion worth of soybeans in 2017. But to see just how big of a drop off there has been after the tariffs, compare September 2017 to September 2018. In September 2017, China purchased $1.1 billion worth of soybeans; in September 2018, China purchased only $24 million worth. The fall off in demand has caused the price of US soybeans to crater. In fact, the price decrease has been so dramatic — nearly 20%; down to $8.50 a bushel — that Reuters reports that in some cases it is cheaper to buy up American soybeans than to buy locally. And that is exactly what Brazilian producers are doing; the price of US soybeans is so low that Brazil is sending most of its domestic crop to China and buying up the US crop at rock bottom prices to make up for any shortfall in domestic supply. China is still getting its soybeans, but US producers are getting hammered.
All told, the Chinese, who previously accounted for 60% of buyers of US soybeans, this year barely make up 12%. American soybeans are effectively in fire sale pricing, and even rock bottom prices have not prevented some farmers from being forced to plow under their fields or let their crops rot for a lack of buyers at a break even price. All of this was eminently predictable to any competent student of economics or history.
Tariffs, in addition to all the damage they do on their own, beget a retaliatory response. In turn, the response hurts many of the same people the tariff was designed to help in the first place. In this case, tariffs against the Chinese were ostensibly aimed at helping blue-collar agricultural and manufacturing workers. Instead, the Trump administration has been forced to offer $12 billion in aid to farmers hurt by “illegal” retaliatory tariffs enacted by the Chinese. The administration’s tariff policy, with respect to farmers, has effectively been reduced to the equivalent of digging a hole in the hope your enemy will fall in, seeing that your friend has fallen in instead, and then believing you are helping by throwing down a rope so he can climb out.