You have probably read or heard that Donald Trump has enacted tariffs on Chinese products being imported into the United States. As a response to Trump’s tariffs on Chinese goods, Chinese has responded in kind with a tariff or tax on American imports of its own. The Chinese have placed a 25% tariff on American farm products. The goods that will now be subject to the Chinese tariff include wheat, soybeans, and meats such as pork and beef. Some additional foodstuffs will be taxed as well.
Democrats are already using the Chinese tariffs as a political campaign tool to get the support of rural voters. They claim that the Chinese tariffs on American farm goods will hurt American farmers. Specifically, they argue that the tariffs will negatively impact the prices that American farmers get for their crops when they sell them.
Will the tariffs hurt American farmers? Are the Democrats correct in that the prices of American foodstuffs will drop? Despite what the Democrats may want you to believe, the answer is no and no.
The price of foodstuffs such as soybeans, grain, beef, and pork is set by the global supply and demand. This is similar to commodities such as oil and copper. Just because China places tariffs on American soybeans does not mean that the price of soybeans will drop and hurt American farmers.
Here is what will most likely happen. The tariff on American imports of grain and meat will simply lead to the Chinese importing food from other countries such as Brazil for example. China will still buy the same amount of beans, grain, and meat that it used to, but from other nations instead of the United States. The United States will then simply export its grain, meat, and beans to the countries that used to buy Brazilian soybeans, meat, and grain.
Thus, the global supply and demand for these items will not change. The prices will remain the same given that other factors remain equal. American farmers have nothing to worry about. There will still be an export market for their crops, and they will get a fair price that is determined by the global supply and demand and not by China’s trade policies.
If you are still not convinced, then a similar event has happened in the past. The Soviet Union used to import American grain. Political events led to the Soviet Union stopping its imports of American food. The Soviets them simply imported food from other countries at a slightly higher price. America then also exported its grain to other countries. The prices of the foodstuffs remained the same.