WASHINGTON — Last week, President Trump announced over $50 billion in tariffs against Chinese goods under Section 301 of the Trade Act of 1974. China is the largest purchaser of U.S. soybeans, buying close to a third of U.S. production, totaling $14 billion annually. There is fear that number could dwindle if China decides to retaliate by cutting off imports of certain U.S. goods.
“Other than Canada and Mexico, China is usually in the top 3 consumer for U.S. agriculture for a wide swath of goods,” said Mike Zuzolo with Global Commodity Analytics. “China is also the pivot-point for the rest of southeast Asia, where the future of food demand is going to come from. A healthy, rich China is going to help increase the wealth and the richness of the rest of that region of the world.”
Will the soybean market be able to withstand a substantial retaliation from the Chinese? Zuzolo doesn’t think so.
“I say that because the wheat, corn and cattle markets have been falling for the past 4 weeks and yet the soybeans really haven’t had that much premium taken out,” Zuzolo said. “A lot of the commodity sector has already pushed negativity into the markets and funds unwound their long position. I am more nervous about the soybeans, followed by the hog sector.”
Shortly after tariffs against China were announced, the pork industry was put on alert that China is thinking about tacking on a 25 percent duty on U.S. pork products. This comes as pork being shipped from the U.S. to China is already in a decline as Chinese domestic hog prices will push imports down an estimated 30 perfect this year.
As for soybeans, the American Soybean Association weighed in on the Trump Administrations actions by saying that retaliation by China against their commodity would cost farmers their livelihoods.
“If there was any question about the likelihood of retaliation by China after previous actions by the administration to protect domestic manufacturers, that doubt was erased. American soybean producers oppose this decision by the administration that puts exports of our soybeans to China in jeopardy, said ASA President John Heisdorffer. “American agriculture has tremendous potential to improve our trade balance. Soybeans can lead this growth in China, which is projected to significantly increase soybean imports over the next ten years. We should be talking about actions that grow this important market, not risk losing it.
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