It is ironic that the trade war between the US and China is hurting soybean farmers who are also staunch Donald Trump supporters.
China on Wednesday made public its answer to US President Donald Trump’s effort to tax imports by placing its own tariffs on nearly $50 billion worth of goods – mainly agricultural products.
In an expected move, China slapped 25% tariff on 106 American products just 11 hours after US imposed its own tariffs on Chinese products.
The Chinese list includes host of agricultural commodities besides cars, liquor and airplanes.
Major food products in the Chinese list are yellow and black soybeans, corn, corn flour, uncombed cotton, durum wheat, fresh & cold beef, frozen orange juice, among others.
Following the news, global commodities saw a sharp decline in their prices with soybean falling 5%, corn at 4% and wheat sliding nearly 2%.
The US soybeans are now trading at their two-month lows while corn prices are at their six week lows.Analysts expect impact on cotton to be contained as China, although a big importer of the product, has created enough buffer over the recent years and has worked to develop the sector domestically.
The story, therefore, lies in soybean.
China is world’s largest importer of soybean and bought nearly 97 million tonne of it from the US in 2017.
If the tariffs go through on a date that is China is yet to announce, American exports of the produce will become uncompetitive and will likely lose its market-share to Brazil and Argentina.
Initial estimates suggest that these tariffs may cut income of soybean farmers in America by up to 30%.
As China has only announced tariffs and not the date when these will come in force, global markets are pinning their hopes on negotiations between the US and China for an amicable solution.