Soybean Farmers and Tariffs

Author: Patrik T. Hultberg
Publisher: International Journal of Instructional Cases

Abstract

IJIC, Volume 4 (2020)

Synopsis

The Trump administration aggressively pursued trade policies that limited imports from foreign countries, especially China. Tariffs targeted at imported steel, aluminum, and many other final and intermediate products, were adopted in an attempt to protect domestic industries, national security, as well as eliminate the impact of “unreasonable” and “burdensome” foreign policies. The policies led to Chinese retaliatory tariffs, including 25 percent tariffs on U.S. produced soybeans. These tariffs, both U.S. and Chinese, affected the profitability of soybean farmers in the upper Midwest, who saw prices of inputs increase while demand and price for soybeans fell drastically. Five soybean farmers, representing thousands of other farmers, are now forced to reconsider their planting decisions going forward.

Keywords

Import Tariffs, Profit Maximization, Soybeans

Target Audience and Usage

The target audience is both economics and business students at the undergraduate and graduate levels. The case can be used in courses ranging from principles of economics, international trade, public policy, and business (MBA, managerial economics) courses. For a business course, the case may highlight how government policies, affecting both input and output markets, force profit-maximizing producers (farmers) in a competitive market to adjust output levels. For an economics course, the case highlights the cost of tariffs on actual people (farmers), both when home government adopts tariffs on imports and when foreign governments adopt tariffs on our exports. In a public policy course, the case explores the impact on national welfare from import tariffs, with or without retaliation. In addition, the case may even challenge students to weigh tariffs’ impact on a specific group (soybean farmers) to the national welfare implications (with or without positive production externality).

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