U.S. farm exports plunged by an abrupt 6 percent this year due to the Sino-U.S. trade war and a worldwide slowdown in economic growth, but they will rebound mildly in the year ahead, said the USDA on Thursday. However, the agency’s first forecast of exports in fiscal 2020 excluded the impact of a promised mutual escalation this fall of the trade war between China and the United States.
Exports will rise by 2 percent in fiscal 2020, which opens on Oct. 1, led by increased exports of U.S. pork, beef, soybeans, and horticultural products, said the USDA. Pork would show the largest gain, up by $800 million, due to Mexico’s removal of retaliatory tariffs and to higher sales of pork to countries hit by African swine fever (ASF), a deadly hog disease that has swept through China and Southeast Asia.
A week ago, China said it would impose higher tariffs on $75 billion worth of U.S. goods, including some agricultural products, and President Trump said the United States would raise its levies on $550 billion worth of Chinese goods — essentially all of the material imported from China into America. The Chinese tariffs would take effect on Sept. 1 and Dec. 15 — the same days Trump originally designated as start dates for higher U.S. duties on $300 billion worth of Chinese products. Duties would rise on Oct. 1 for the remaining $250 billion of imports, said the office of the U.S. trade representative.
The USDA based its forecast of ag exports on trade policies in effect in mid-August, which means it did not consider the impending increase in tit-for-tat tariffs. Nor did it consider the possible ratification of the United States-Mexico-Canada Agreement or the potential increase in market access to Japan stemming from ongoing trade negotiations. “As always, when we are doing our forecasts … we take into account the policies that are in place at the time the projections are made,” said Warren Preston, deputy USDA chief economist, in a USDA radio news interview.
In a quarterly report, the USDA said ag exports would total $134.5 billion this fiscal year, a drop of nearly $9 billion from last year. Corn and soybeans notched some of the largest declines. Sales to China are forecast at $7.3 billion, one-third of the usual volume before the trade war.
Looking to 2020, the USDA said higher prices and tonnage were expected for pork and beef exports. Soybean prices would remain weak, but export volume would rise. Exports to Canada and Mexico, the two largest U.S. customers, would grow by $900 billion, to a combined $41.3 billion, or 30 percent of all ag exports. China was forecast to import $7.5 billion of U.S. food and ag products, an increase of $200 million.
“Chinese demand for soybeans is expected to continue to be restrained by trade tensions and the prevalence of ASF. The latter, however, is expected to boost China’s import demand for pork,” said the USDA.
World economic growth slowed to 1.5 percent this year, down from 2.1 percent in 2018, said the USDA, which forecast a growth rate of 1.6 percent for fiscal 2020. Slower growth constrains demand for U.S. food and ag exports. “The U.S.-China trade conflict, Brexit, and the developing trade dispute between Japan and South Korea are some of the key uncertainties slowing global trade and investment and pushing forecasts for lower economic growth,” said USDA economists.
The United States is forecast to import $129 billion worth of food and ag products in 2020, with Mexico and Canada accounting for $40 billion of the total.
Agriculture is a perennial bright spot in the U.S. trade picture because it regularly registers a surplus. The surplus was $43 billion in 2014, when exports set a record high. It will shrink to $5.2 billion this year, the result of the downturn in exports and a steady year-to-year rise in imports. The ag trade surplus is forecast for $8 billion in 2020. Fruits, vegetables, nuts, and other horticultural products account for half of food and ag imports.
The quarterly Outlook for U.S. Agricultural Trade is available here.