Working Paper

Short-Term Impact of the Trade War on U.S. Agricultural Commodities Futures Prices [Draft upon request]

Abstract: This study investigates the short-run effects of the U.S.-China trade war on U.S. agricultural futures prices, focusing on five primary commodities: soybeans, corn, wheat, rice, and oats. Initiated in early 2018 by President Trump, the trade war resulted in substantial tariffs imposed by both countries, severely impacting the U.S. agricultural sector. To mitigate farmers’ losses, the U.S. government introduced $28 billion in trade aid packages for farmers. This paper utilizes daily futures price data for these grains from 2004 to 2020 and comprehensive supply and demand factors. Due to the non-stationarity of the data, first-difference regressions are employed to quantify the price effects of tariffs and government payments. The findings indicate that a 25% Chinese tariff on U.S. soybeans led to a significant decrease in soybean and wheat futures prices, highlighting the severe short-term impacts of trade barriers on agricultural markets. Additionally, the analysis reveals that the massive trade aid payments had mixed effects on futures prices, challenging the assumption that such payments would not further distort the market.