Study: New trade war with China could cost California exporters

A renewed trade war with China could cost California agricultural exporters about $1 billion, economists say.

Recent Biden administration tariff increases for Chinese electric vehicles, solar cells, semiconductors, and aluminum and steel products could wreak havoc with exports of farm products, according to a new study from economists at the University of California, Davis, and North Dakota State University.

The study evaluated the potential implications of the U.S. revoking China's Permanent Normal Trade Relations status, according to a news release. Economists found that if China retaliated against a change in China's Permanent Normal Trade Relations status, it could lead to a 9.5% increase in China's agricultural import tariffs, resulting in potential trade losses to California agriculture of around $1 billion annually.

California agriculture was hit hard by the 2018-19 trade war with China. Despite that fact, there is increasing support in Congress for further restrictions on trade with China, the release said.

The authors' research suggests that some product groups — such as horticultural products, dairy, livestock and meats — would likely experience even steeper than average increases in import tariffs.

“The impact on import tariffs for non-agricultural sectors would be even larger, with the average import tariff going up from 3.9% to 32.5%,” Colin A. Carter, a study co-author and a distinguished professor in UC Davis' Department of Agricultural and Resource Economics, said in the release.

Economists estimated an average decline in California export value between 28.4% and 34.8% when comparing a scenario where China's Permanent Normal Trade Relations status is revoked to one where it is not, the release said. That would translate to an estimated trade loss of between $800 million and $1 billion, using 2023 California agricultural exports.

Some crops that rely heavily on China for exports, such as tree nuts, would be more severely impacted by these effects, the study said.

Source: The Packer