In March 2018, the U.S. enacted a tariff on Chinese goods.
In response to this U.S. action, Beijing placed an additional 25% percent tariff on U.S. imported goods in July 2018. The results of this trade war have varied, but in November, for the first time since 1977, China decided not to buy soybeans from the U.S. This is a huge loss for the U.S. because China is the world’s largest soybean purchaser.
Even though there is currently a truce for 90 days on the tariff war between the two countries since December 1st, China still did not buy a single soybean from the U.S. this November. This is because of the 25% additional tariff the Chinese government placed on U.S. goods in July 2018, as retaliation for the Trump’s tariff bump on Chinese goods coming to the U.S. Instead of getting the needed soybeans from the U.S., China bought 5.07 million metric tons of soybeans from Brazil in November, 80% more then they bought from Brazil a year ago.
China usually imports 60% of soybeans from the U.S. each year. The total value of the purchase is roughly about $12 billion per year. However, because of this tariff war, China drastically reduced their soybean purchases, and with the U.S. soybean harvest coming to market now, the timing could not be worse.
Even though China bought a small amounts of soybeans in December, U.S. farmers are worried about the future.
They are already looking for other buyers in Europe and other countries to sell the rest of the harvest. Pakistan is another potential buyer, but nothing is certain yet. The U.S. Department of Agriculture (USDA) has promised to pay U.S. soybean farmers $12 billion to help them to survive these tough times, but the farmers want a more permanent solution. They want to sell their harvest instead of receiving government checks.
With the uncertainty of how long the trade war will last, there are many questions about the impact this will make.
Will U.S. soybean farmers be able to send their product elsewhere? Or, will they have to rely on the government’s money? How will the U.S. compensate the loss of $12 billion that the government is accustomed to making from selling soybeans to China? Only time will tell.
