“The trade war knocked it down, but we're back on trend,” said Jason Hafemeister, Secretary’s Trade Counsel, Trade and Foreign Agricultural Affairs, USDA based in Washington, DC, during his presentation at USDA’s 97th Annual Ag Outlook Forum. “We see a lot of potential in a free trade environment to significantly expand our sales.”

When China was admitted to the World Trade Organization (WTO) in 2001, it was a $1 billion market. Today, it’s $25 billion. Besides the trade war, U.S. agricultural exports to China have increased year over year.

Before the trade war, the US sold $24 million in agricultural products to China. This accounted for 20-25% of all Chinese ag product imports. In 2018 and 2019, the tariffs impeded US sales in China, reducing that market share down to 10%.

Now, however, US market share has increased to 14%. While that may seem like an increase, the fact that the Chinese market is growing and competitive makes it a less impressive figure. Additionally, the US failed to hit the $36 billion target outlined in the Phase One agreement.

The US also faces stiff competition from other nations in several key areas:

• The US leads in cereals and cotton

• Brazil leads in soybeans

• Europe leads in meat

“As well as we're doing in China, we are seeing our competitors do even better,” said Hafemeister. “That's an opportunity for us to improve our competitiveness.”

Impact of the Phase One Agreement

The Phase One agreement removed some key technical barriers to US trade. These include the removal of the bans on poultry and beef, so long as they come in under a tolerance. As a result, US pet food markets have access to Chinese poultry and beef, opening millions of dollars in potential sales.

China also removed a series of technical restrictions that burdened US exporters. These include facility and product registrations that restricted individual US companies whose registration hadn’t been processed yet.

However, the mending of the trade relationship is still a work in progress. Although China has both multi- and bilateral obligations to the US, seeing these obligations met in practice is an unfinished story:

• China still hasn’t met their product and purchase requirements (although they have bounced back)

• China is still rolling back restrictive technical measures

• China has also removed retaliatory tariffs, allowing the US to participate in growing markets

2020 Crop Export Performance

Although the specific figures vary from crop to crop, the general story across the board is that most US crops will beat their 2017 (pre-tariff) numbers, signaling a recovery within the Chinese market.

The dynamics of the animal market faced a much more steep hill to climb, due to the fact that US meat has been shut out of the Chinese market since 2017. However, 2020 saw recovery and growth in several key sectors.

Here are some examples of how specific US ag products have been performing:

• Soybeans showed $14.2 billion in 2020

• Cereals showed $2.9 billion in 2020; Corn specifically showed just over $1.2 billion, a record year for the crop

• Cotton showed $1.8 billion in 2020

• Tree Nuts showed $700 million in 2020

• Meat showed $3.2 billion in 2020; Pork hit over $2 billion, Beef just over $300 million, and Poultry at $750 million

Looking to the future, USDA has made specific predictions on how key crops are expected to perform:

• Soybeans are expected to increase by $2.0 billion to $38.3 billion in 2021

• Grain and feed products (corn, wheat, sorghum) are expected to increase by $2.2 billion to $37.8 billion in 2021

It has been a difficult last few years for the US-China trade relationship. But with these new agreements and continued growth within the market, the US is poised to perform well in what is quickly becoming the largest agricultural import market in the world.