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ISU Expert: New Opportunities for Agricultural Trade with China

Ames, Iowa — Trade relations with China continue to be one of the biggest issues affecting the agricultural markets, and an economist with Iowa State University Extension and Outreach says recent events point toward opportunity for both countries.

Wendong Zhang, assistant professor in economics and extension economist at Iowa State University, has written multiple articles this fall exploring the impacts of strained bilateral relations, COVID-19 and the Phase 1 trade agreement.

Zhang says that deteriorating bilateral relations make the Phase 1 trade deal even more important. He says the change of the federal administration and the Phase 1 deal give both countries an opportunity to improve and rebalance their portfolio.

In a recent article in Applied Economic Perspectives and Policy, Zhang discusses the importance of healthy US-China trade relations and how Phase 1 could possibly lead to a more balanced portfolio of commodities being traded, with increases in protein and retail food products.

According to Zhang, challenges such as COVID-19, the African swine fever, and China’s growing economy continue to create demand for US pork, beef, and poultry products. He and colleagues Dermot Hayes and Xi He project, in an updated CARD policy brief, that China is on track to import $31.15 billion in ag products from the US in Phase 1, which is still under the $36.5 billion target but substantially higher than the previous estimates.

However, he expects the demand for protein and other agricultural products could fill the gap, setting a strong precedent going forward.

Zhang says that a more balanced portfolio will allow China to strengthen economic ties with agricultural states outside the US Midwest, such as California and Florida, and also fits China’s diversification objectives of not solely relying on soybeans when buying US agricultural products.

He has published similar articles in the Ag Decision Maker and The Conversation. Zhang also gave a related presentation through the Ohio State University Ag Policy & Outlook Conference, called China as an Indispensable Trade Partner with US Agriculture.

In the recent CARD Policy Brief, Zhang also notes that China imported a record amount of corn in recent years, with an outstanding 8.56 million metric tons for delivery in the 2020-21 marketing year. He concludes that it’s very likely China will exceed its tariff rate quota of 7.2 million metric tons, setting up a strong possibility that China will need to expand its 7.2 million tariff rate quota for corn.

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