U.S.-China Agricultural Trade and Environmental Outcomes in the Gulf of Mexico

Trade, agricultural production and the corresponding environmental outcomes are interdependent. First, we illustrate this interdependence analytically and show that the direction of the relationship between trade and environmental outcomes is theoretically ambiguous. Next, we empirically examine the relationship between U.S. – China agricultural commodity trade and nitrogen runoff to the Gulf of Mexico using an integrated hydro-economic price endogenous partial equilibrium model for four major U.S. commodities. The results show that a 25% Chinese tariff on U.S. soybean exports increases annual N runoff to the Gulf by 2,000 metric tons as soybean production is replaced with more N intensive crops, including corn. We also show that a 10% reduction in N runoff to the Gulf reduces corn production by 8.8%, which is equivalent to the impact of a 5% Chinese tariff on U.S. corn imports