Study Details How Another Trade War with China Could Harm California Farmers

Brian GermanAgri-Business, Exports/Imports, Trade

A new study warns that a renewed trade war with China could cost California agricultural exporters up to $1 billion annually. Economists from UC Davis and North Dakota State University predict significant economic losses if the U.S. revokes China’s Permanent Normal Trade Relations (PNTR) status, a move that would sharply increase tariffs on Chinese goods. This could trigger China to retaliate with its own tariffs on American products, including agricultural goods.

Trade War

The study, titled “Revoking China’s Preferred Trade Status Would Be Costly for California Agriculture,” highlights the potential fallout for California’s farmers, who rely heavily on the Chinese market. Since China joined the World Trade Organization (WTO) in 2001, California’s agricultural exports to China have surged from $200 million to over $2.6 billion in 2023, making China a critical market for the state.

During the 2018/19 trade war, retaliatory tariffs led to lower prices and lost opportunities for farmers. For example, almond prices plummeted from $4.00 per pound in 2014 to $1.40 per pound. Experts fear similar outcomes if the PNTR is revoked, estimating that California’s agricultural exports to China could drop by 28.4 to 34.8 percent, translating to an annual loss of $800 million to $1 billion. Over 60 percent of these losses would impact horticultural products, with tree nuts like almonds and pistachios being particularly vulnerable.

California’s dependency on the Chinese market varies by product. Cotton exports to China account for 30.1 percent of their sales, while livestock and meats make up 22.4 percent, and grains and feeds 12.2 percent. The previous trade war had a severe impact, with U.S. agricultural exports to China dropping by 71 percent, causing significant economic harm and job losses. Revoking PNTR status would raise U.S. tariffs on Chinese agricultural products from 5.1 to 14.6 percent, likely prompting China to increase its tariffs on U.S. goods, resulting in reduced market access and lower farm prices.

The study underscores the difficulties in regaining lost market access, stressing the importance for policymakers to consider the far-reaching impacts on California’s agricultural sector. The potential new tariffs come amid recent Biden administration increases on Chinese electric vehicles, solar cells, semiconductors, and metals, creating worry of another trade war.

Brian German
Ag News Director / AgNet West