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Estimating the Market Effect of a Trade War: The Case of Soybean Tariffs

Author

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  • Adjemian, Michael K.
  • Smith, Aaron
  • He, Wendi

Abstract

In 2018, China retaliated to U.S. trade action by levying a 25% retaliatory tariff on U.S. soybean exports. That tariff shifted market preferences so that Chinese buyers favored Brazilian soybeans. We use the relative price of a substitute (RPS) method to estimate that the resulting trade disruption effectively drove a wedge into the world soybean market, lowering U.S. prices at Gulf export locations by $0.65/bu on average for about five months, and increasing Brazilian prices by about $0.95/bu, compared to what would have been observed without the tariff in place. It is likely that the impact of China’s tariff on producers and purchasers of soybeans across the United States was heterogeneous and affected by local factors like transportation infrastructure, storage capacity, and crush facility proximity.

Suggested Citation

  • Adjemian, Michael K. & Smith, Aaron & He, Wendi, 2019. "Estimating the Market Effect of a Trade War: The Case of Soybean Tariffs," 2019 Annual Meeting, July 21-23, Atlanta, Georgia 292089, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea19:292089
    DOI: 10.22004/ag.econ.292089
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    JEL classification:

    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy; Animal Welfare Policy
    • Q11 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Aggregate Supply and Demand Analysis; Prices

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