US agriculture exporters fear trade war 2.0 will ‘kill’ China business

SHANGHAI – Mr Manuel Garibay travelled from the American north-west to Shanghai in early November, hoping to sell dried cherries to Chinese consumers.

But even in an exhibition hall filled with prospective buyers at China’s largest import expo, he worried that the lucrative market – which makes up a fifth of his company’s profits – might soon grow harder to reach.

As the spectre of a renewed trade war looms under a second Donald Trump presidency, the sales manager at Royal Ridge Fruits, a Washington state cherry grower, expects Beijing to retaliate with levies of its own “to agriculture, and to us”.

“I think if tariffs are imposed, it could potentially kill all our Chinese business,” he told The Straits Times on Nov 6, shortly before Trump won the US presidential election.

The American agri-food industry is bracing for a fresh round of economic pain, should he up the ante in a trade war that has already hit it hard.

Heavily exposed to the Chinese market and seen to form part of Trump’s support base, the farm sector has been a handy target for Beijing to retaliate against US tariffs.

When Trump slapped levies of up to 25 per cent on a range of Chinese goods in 2018, China responded with tit-for-tat duties on US products including soya beans, pork and fruit.

American farmers lost over US$27 billion (S$36 billion) in exports from mid-2018 to 2019 – mostly from China, the US agriculture department estimated.

A de-escalatory deal known as the Phase One agreement was later inked in 2020 during the Trump administration, and Beijing granted some tariff waivers to support farm purchases.

This time, the President-elect has said that he would impose taxes of 60 per cent or more on Chinese imports.

“US soybeans and corn are prime targets for tariffs,” wrote economists from the American Soybean Association and National Corn Growers Association in October. 

A study commissioned by both associations and released that month projected that their farmers could lose as much as US$7.3 billion combined in annual production value over the next decade, if China responds with 60 per cent tariffs.

“The soybeans, the beef, the chicken – they’re going to hurt,” said American whiskey exporter Daniel Benefield of Rad Beverage International, on the sidelines of the Shanghai import fair.

He believes that his industry will be spared as Chinese imports of American spirits are low, but that Beijing would “hit” agriculture given the large volumes traded.

China is the US’ largest overseas market for agricultural products. The sector accounted for a fifth of total US exports of goods to China in 2023.

Already, some industry players in China are said to be hedging against the risk of a trade war by stockpiling American goods.

“I understand that some Chinese importers are trying to buy as much as possible (of US agricultural products) at this point,” said Mr Eric Zheng, president of the American Chamber of Commerce in Shanghai, on Nov 12.

The business chamber co-organised a showcase of US agricultural products at the China International Import Expo in Shanghai from Nov 5 to 10, where more than US$711 million in deals from soya beans to ginseng were signed.

Analysts in China say while US agriculture could get caught in the cross hairs of a renewed trade war, the situation today differs from that in 2018.

Since the onset of Trump’s trade war, China has grown less reliant on US farm goods, having stepped up domestic production and diversified its import sources.

China’s soya bean purchases from Brazil, for instance, have surged, while the US’ market share has fallen. But US soya bean exporters still rely heavily on the Chinese market, which accounts for half of their overseas sales of the commodity.

Renmin University researcher Xu Tianqi believes that US agriculture will once again suffer should Trump hike tariffs, and not necessarily through retaliation in kind.

Chinese buyers of farm products – many of which are state-owned companies – could simply choose to order from other suppliers even without counter-tariffs, said the associate research fellow at the university’s Chongyang Institute for Financial Studies.

Economist Mei Xinyu sees the agriculture sector as a candidate for retaliatory tariffs, adding that rural districts in the US formed Trump’s “staunchest social base”.

But the responsible thing to do for now is to prevent the trade war from reaching that point as far as is possible, said the research fellow at the Chinese Academy of International Trade and Economic Cooperation, a think tank under the commerce ministry.

Dr Mei added that China is now more confident and in a better position relative to the US, than when the trade war began in 2018.

The more important countermeasures for China to adopt, as it approaches protracted competition with the US, are domestic reforms to strengthen the economy, and efforts to win over other trading partners affected by American protectionism, he noted.

In the agriculture industry, stakeholders stress the need for continued US-China cooperation. 

“China being the world’s largest agriculture import market and the US being one of the largest global agriculture exporters — we need to work together,” said US Soybean Export Council chief executive Jim Sutter on Nov 6.

He added that a “strong path forward” might be to explore resuming the Phase One trade agreement. The deal saw China agree to buy US$200 billion more in US farm products and other goods and services – a commitment that was not wholly fulfilled, according to trade data compiled by a US think tank.

At the Shanghai import expo, standing behind plates of dried cherry samples, Mr Garibay said he is “not looking forward” to trade war 2.0.

“It would be a bad deal for both countries… a lose-lose situation for China and the United States,” he added.