The Impact of the U.S.-China Trade Dispute and COVID-19 on the Korean Soybean Market

Abstract

Purpose - This study examines the impact of the U.S.-China trade dispute and COVID-19 on the Korean soybean market. Design/Methodology/Approach - A bilateral trade soybean model considered the Armington and spatial equilibrium approaches is used to analyze scenarios: (1) Removing China’s retaliatory tariff on US soybean without COVID-19, (2) Removing China’s retaliatory tariff on US soybean with COVID-19, and (3) No change in retaliatory tariff on US soybean with COVID-19. These scenario results are compared with the baseline that the U.S.-China trade dispute is in place continuously. Findings - The results show that removing China’s retaliatory tariff decreases domestic soybean imports and rises prices in Korea. Moreover, if we take COVID-19 into account, the decrease in domestic soybean imports is relatively larger and COVID-19 falls the domestic soybean price because of the decrease in domestic consumption. The soybean price impact of the U.S.-China trade dispute along with COVID-19 is larger than the U.S.-China trade dispute without COVID-19 in the absolute difference. If China eliminates tariff on US soybean with COVID-19, then the fall in domestic soybean imports is larger and the price is smaller. Research Implications - This study provides the impact of the U.S.-China trade dispute with COVID-19 on the Korean soybean market. The results showing the price variation from the scenario analysis imply that the Korean agricultural market needs to be monitored because of the response in the agricultural market to shocks. Moreover, the model used for this study gives traders and policy makers a tool to analyze the Korean soybean market.