Analysis of Chinese Tariff Impacts on the Sorghum Market under Varying Market Structures

Using a theoretical and empirical spatial equilibrium model, we examine the effect of the Chinese 25% tariff on the world sorghum market under various market structures. The effects of the tariff are less pronounced under bilateral monopoly than under perfect competition. Specifically, the reallocations of trade caused by the tariff are lessened as the United States uses its market power to mitigate adverse effects. This reduces the tariff’s impacts on prices, production, consumption, and welfare for most countries. However, the calibration revealed that the United States and China do not exert significant market power on the world sorghum market and that international sorghum trade is more accurately represented by perfect competition.