Question

China has recently retaliated to US tariffs on steel and aluminum and has imposed a wide range of tariffs on U.S agricultural export that are destined to China. These tariffs are expected to have a significant negative impact on the U.S. agriculture products.

If the U.S. Agricultural products, which are heavily subsidized by the US government are not exportable to China due the existing trade war, how does this affect:

1) the U.S. farmers

2) the American tax payer

3) short term food supply in America

4) long term food supply in America

Discuss each in detail.

5) Assuming that China seeks its food supply from Africa, do you think that China might get cheaper agricultural products from Africa and as a result, America, but not China will be on the losing side?

Answer 1

The recent trade war between US and China affects both countries trade pattern. The article concerned with US agriculture export to China. As US exporting its Agri products to China with high input subsidy and China bring restrictions to its import from US it will affect US as follows.

1. US farmers' income will be reduced because price realization of its product reduces as its market reduces.

2. The American taxpayers wouldn't affect so much because their Agri tax to GDP is not so high. Again from Aluminium and steel import tax increases much.

3&4. It affects short term supply of US agri products. There will be excess supply in the Agri market in the short term. Naturally price will go down. But in the Long run such excess will disappeared because either US will search different marker for its product or such trade war will removed between these two with negotiations.

5. If China imported Agri products from Africa obviously it would cost more to China. China would be loser in short run but in the longer periods it might be search agriculture produce from India, Bangladesh or like such agriculture dominant countries. In that case it's trade balance would be positive because such countries will export agriculture produce at the cheapest rate.