OMAHA (DTN) -- While the U.S. and China may have reached a tariff reprieve this week, the president of the American Soybean Association told senators Wednesday that soybean exports to China still face higher tariffs approaching levels similar to the height of the 2018 trade war.

Caleb Ragland, a Kentucky farmer, represented agriculture's take on critical supply chains during a hearing before the U.S. Senate Finance Committee. Ragland told senators a prolonged trade war could lead to a farm crisis similar to the 1980s collapse.

In 2018, retaliatory duties on soybeans reached 30.5% before adding in the Most Favored Nation (MFN), a 3% duty, and the China's Value Added Tax (VAT), a 9% duty. That 42.5% tariff effectively crippled soybean exports, Ragland told senators. Chinese tariffs on U.S. soybeans reached 30.5% in 2018.

Currently, the combined tariffs now impose a 34% duty, including the MFN and VAT, even after the deal struck last week that rolled back tariffs that could have been as high as 155%.

"While this reduction is a step in the right direction, U.S. soybeans are still facing a duty into our largest export market nearly equal as the height of the 2018 trade war," Ragland said.

The deal struck between the U.S. and China on May 12 states China will remove the retaliatory tariffs announced since April 2 and will suspend non-tariff measures implemented since the beginning of April. But Ragland noted the initial rounds of retaliation against U.S. soybeans were announced on March 4, "and it's our understanding those tariffs were not reduced."

Thus, U.S. soybeans still face a 10% baseline duty coupled with a 10% retaliatory rate placed in March along with other import duties that equal 14%, Ragland told senators.

U.S. soybean farmers lost as much as three-quarters of the crop's export value in 2018 from the trade war. As a result, Brazil also ramped up production to meet Chinese demand. "This increase by our export competitor has done irreparable and long-lasting harm to the U.S. soybean industry," Ragland said.

Ragland cited agriculture, especially soybean farmers, relies heavily on reliable export markets. U.S. soybean growers exported nearly 25 million metric tons (919 million bushels) to China in the last marketing year. That translated into 54% of all soybean exports and $13 billion in value, he said.

Ragland called on senators to press the White House to negotiate greater market access. "We need increased trade is the bottom line. That's the lifeblood for American agriculture and the American soybean industry in particular."

Soybean prices will decline significantly this summer if those tariff levels do not decline, Ragland told senators.

Beyond China, the European Union and Canada have also each threatened retaliatory tariffs on soybeans, Ragland said. Asked about the complications of the Trump administration establishing tariffs, pulling them back, then setting new tariffs on other products, Ragland said it causes customers to look elsewhere.

"It gives our customers uncertainty in their minds and a reason to look for other sources that are more dependable," Ragland said.

Ragland also pointed to the overall challenges facing farmers right now. Commodity prices are down 50% from three years ago, while input and land prices remain higher. Older farmers are selling out if they have equity, while others are just leaving the business otherwise. "There are bankruptcies taking place."

He cautioned against the impacts it would have on farmers if the trade war continued and a deal is not reached with China.

"It's already tough. If you add a trade war, it takes it to a whole other level -- one that could equal the farm crisis of the 1980s, of which was devastating to our farm economy. The farm economy is critical to our rural communities."

He stressed the ripple effects a poor agricultural economy has on local businesses, schools and churches in rural towns when commodity prices are depressed. When agriculture is struggling, it's hard for the economy of the U.S. to do well, he said.

"We're in a bad spot and we're in a position where this could get much worse depending on the decisions being made well."

Sen. Chuck Grassley, R-Iowa, asked about whether the soybean industry would be served well if China agrees to a deal similar to the 2020 Phase I Agreement. ASA has specifically called on the Trump administration to negotiate a "Phase Two" deal. Phase I quickly provided needed export demand, Ragland said, but there was no enforcement of the agreement by the Biden administration.

"We would like to see a minimum of those volumes return and we need those volumes desperately," Ragland said. He added, "We need higher prices and that's driven by higher demand, and trade drives demand."

China is also almost impossible to replace for soybean farmers because China imports more soybeans than the rest of the world combined. Ragland pointed to the Chinese pork industry, noting the country has more hogs than the rest of the world as well. "Their appetite for soy protein is nearly unlimited. That's why they are so vital and why we can't replace them with other customers."

Leaders within the Trump administration, such as Agriculture Secretary Brooke Rollins, have said the administration would provide a package of aid to farmers for trade losses if necessary. The first Trump administration provided roughly $27 billion in trade aid to farmers in 2018 and 2019.

ASA had specific requests for the Trump administration and detailed four asks to the lawmakers:

-- Suspend all tariffs on Canada and Mexico and quickly review and renegotiate the U.S.-Mexico-Canada Agreement (USMCA).

-- Quickly negotiate a "Phase Two" agreement with China.

-- Utilize the reciprocal tariff announcements to level the playing field and create new market access.

-- Reestablish certainty in U.S. trading relationships.

Also see, "US-China Trade Talks: Soybean Prices Quickly Respond to China, US Temporarily Rolling Back Tariffs," https://www.dtnpf.com/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

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