California would suffer if the U.S. renews trade war with China, study shows

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California would suffer if the U.S. renews trade war with China, study shows

A new study published by UC Davis and Dakota State University economists shows that a renewed trade war with China could cost California exporters up to US$1 billion annually.

Revoking China’s Permanent Normal Trade Relations (PNTR) would sharply increase tariffs on Chinese goods by 9.5% and could trigger retaliation from China on American products, including agricultural goods, prompting China to increase its tariffs on U.S. goods, resulting in reduced market access and lower farm prices.

The study titled Revoking China’s Preferred Trade Status Would Be Costly for California Agriculture, emphasizes how California's agriculture depends on access to China's market since the country joined the WTO in 2001. From that point, the percentage of California's total agricultural exports to China grew from 2.4% to 9.9%.

The trade relationship with China also contributed to an increase in California's agricultural production and expansion of cash crops. Almond acreage increased from 0.6 million acres in 2002 to 1.4 million acres in 2023. This period also saw sharp price increases for various export commodities, illustrated by the price of almonds, which increased from $1.11 per pound in 2002 to $4.00 per pound in 2014. 

California’s agricultural exports to China have surged from $200 million to over $2.6 billion in 2023, making China a critical market for the state. 

After the U.S-China trade war broke out in 2018/19, the country's trade retaliation resulted in a decline in export prices. The study reports this as a cautionary tale. Horticultural products, dairy, livestock, and meats would experience steep increases in import tariffs. 

The study illustrates the difficulties California would face in regaining lost market access and stresses the importance for policymakers to consider the far-reaching impacts on California’s agricultural sector.

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