Friday, April 20, 2018

Trade War Adjustments in Sorghum

The U.S. sorghum crop is looking for new buyers after China imposed tariffs on the grain. The new tariffs are approximately two times the market value of the sorghum, so there might as well be a ban on U.S. sorghum in China.

Sorghum is considered a niche crop, but that does not mean it is small. Reuters identified 20 container ships carrying U.S. sorghum to China, en route at the time the new tariffs were announced. Five of these were seen to change course immediately when the new tariffs were announced.

One possible outcome is that all available Australian sorghum is sold to China, while U.S. sorghum is shipped to Australia to cover the shortfall. This potential change in trading pattern, resulting in greater costs which are reflected in higher prices in the importing country, is the kind of thing that makes economists skeptical of country-specific tariffs and quotas.