Question

1. United States exports soybean oil to China. However, to protect the Chinese soybean oil market, Chinese government has high tariff in place for US soybean oil exports. Explain how United States can plant location decisions to avoid paying high tariffs and still sell soybean oil in China.

Answer 1

The US and China trade war is known to people across the globe and has seen big effects for the two countries. The tariffs have extended to numerous products and services, Soybean being one of them.

Recently, China decided to charge tariffs as high as 25% on soybean imported from the United States. The United States is one of the key manufacturers of the same, and will face difficulty if it does not sell in the most populated country across the globe.

To avoid this situation, the United States could set up companies in India which will help maintain the export surplus to China. India is relatively evolving and now, it is entering into key partnerships with the United States. On the other hand, China has plans to reduce soybean import tariffs from countries such as India, South Korea and Bangladesh to 0.

Therefore, in my opinion if the Untied States wants to keep selling in China it can either set up plants in these locations, or act as a direct supplier of raw materials for companies located there and be able to still make profit over sales of soybean respectively.

Please feel free to ask your doubts in the comments section.