Soybean matters in US-China trade war

iff on soybean imports from US, this market is bound to undergo serious disruption in both countries. According to China’s official news agency Xinhua, pork prices have fallen by more than half between 2016 and now. According to Bloomberg, soybean imports from the US had a duty of 3% earlier. With a 22 percentage point hike in tariffs, soybean and hence pork prices will most likely go up. To be sure, China’s rising domestic production of soybeans – farmers are being subsidised to increase cultivation – might reduce its import-dependence for the product. However, it is unlikely that it will neutralise the impact of the tariffs. US soybean imports accounted for 40% of total soybean imports in China in 2016. China as a whole accounted for more than 60% of global soybean imports in 2016. Latin American countries like Brazil, Uruguay and Paraguay could also gain from the Chinese duties on US soybean. Irrespective of the management in soybean sourcing from other importers or domestic production, there is bound to be a significant impact of soybean tariffs on US imports on the Chinese economy.

The implications might be more unsavoury for the US and President Donald Trump though. Soybean farmers had voted overwhelmingly for Trump in the 2016 elections and they are known to be partial to Republicans with donations. According to Washington based non-profit research organisation Centre for Responsive Politics, 78% of their donations have gone to the Republican Party in 2018. “Soybeans are the top agriculture export for the United States, and China is the top market for purchasing those exports,” said John Heisdorffer, a soybean grower from Iowa state and president of the American Soybean Association in a statement on July 6 when the first round of tariffs went into effect. “The math is simple. You tax soybean exports at 25%, and you have serious damage to US farmers,” he added.

It is hardly surprising that Trump was tweeting about the plight of America’s soybean farmers due to tariffs (which his own actions have triggered) last week. 100% 80% 60% 40% 20% China soybean 100% 80% 60% 40% 20% China's merchandise trade surplus with US

China's overall trade surplus in goods and services

400

350

300

250

200

150

100 500.0 0

(Figures in $ billion)

-50 1985 Feed

0%

1961

0% 1967 Food Losses Processing Rest soybean Seed (Figures in %) Excluding soybean (Figures in %)