Impacts of Chinese Tariff on World Soybean Markets

Abstract

China targeted U.S. soybeans, among other commodities, for its recent retaliatory tariff chiefly because of the sheer volume of its imports from the United States. We develop a theoretical and empirical spatial equilibrium trade model to analyze the effects of the 25% Chinese soybean tariff on the United States, China, and nine other major soybean trading regions. Both the United States and China incur welfare losses as a result of the tariff, but Brazil experiences a large net gain. The United States mitigates some of its losses by reallocating trade to other importers, but at a cost to smaller exporters such as Canada.

Keywords

• spatial equilibrium model
• trade
• welfare