In 2017, the U.S. imported $368 million worth of soybeans, charging a zero percent tariff, and exported $21.5 billion worth of soybeans. The net trade balance on U.S. soybeans equates to more than a $21 billion surplus.
Buying more than 60 percent of the global production last year, China is the world’s largest importer of soybeans and the U.S.’s largest customer, importing just over $12.3 billion worth of U.S.-produced soybeans in 2017.
The current tariff China charges on soybeans is 3 percent. However, with retaliatory tariffs of 25 percent, the U.S. is now charged 28 percent.
Free trade agreements such as NAFTA encourage trade between nations by lowering the tariff on soybeans to zero percent. Mexico is our second-largest soybean customer and charges the agreed-upon zero percent tariff, instead of their average tariff of 7.5 percent on soybeans.
Free trade agreements continue to boost trade by lowering barriers between nations. In 2017, the U.S. exported $2.5 billion worth of soybeans to FTA partners, up 11 percent from 2016.
Understanding GDP and tariffs
It’s important to understand the relationship of Gross Domestic Product (GDP) per capita and the average tariff a country charges incoming agricultural products.
The United States has an estimated $59,500 GDP per capita and an average Most Favored Nation (MFN) tariff rate of 5.2 percent for agricultural products.
MFN tariffs are what countries promise to impose on imports from other members of the World Trade Organization unless the country is part of a preferential trade agreement (such as a free trade area or customs union).
In contrast, countries with a substantially lower GDP per capita, such as India and Ghana, have a higher MFN tariff of 32.7 percent and 20.2 percent, respectively.
One of our largest trading partners, China, maintains an average tariff on agricultural products of 15.2 percent. Another of our largest trading partners, the European Union, charges an average of 11.1 percent on agricultural products.
Canada and Mexico, our counterparts in the North American Free Trade Agreement, currently charge average MFN tariffs of 15.6 percent and 14.6 percent, respectively, on agricultural products from WTO members who are not free trade agreement partners. However, because of NAFTA, the preferential average tariff on U.S. agricultural products into Canada and Mexico is 6.9 percent and zero percent, respectively.
Healthy trade relationships based on reciprocal exchange build countries. Maintaining these relationships not only strengthens the global economy but also boosts the welfare of every American.