With Chinese official media vowing no compromise in negotiations with the United States, the country seems to be settling in for a protracted siege.
Considering that China ran a trade surplus of $420 billion with the United States last year, it is obvious that it can’t come close to matching the United States in terms of tit-for-tat tariffs. But it does have other arrows in its quiver. Expert commentary and internet speculation have focused on three: an embargo on imports of soybeans from the United States, an embargo on exports of rare earth metals to the United States, and the diversification of China’s currency reserves away from the dollar.
Fortunately for the United States—and for the health of the global trading system—each of these would be an empty threat.
In 2018, as rhetoric about the trade war took off in earnest, China slapped a punitive tariff of 25 percent on American soybeans. Soybeans are the United States’ biggest farm export, and they are important crops in the Midwestern states that swung to elect Trump in 2016. The 25 percent duty has been widely cited as the root cause of low prices that have led to a wave of farm foreclosures across the U.S. heartland.
The United States’ largest competitor in the global soybean market is Brazil, so one might expect Brazilian farmers to be jumping with joy as they see more demand for their produce. But Brazilian soybean prices have fallen almost 20 percent since April 2018, almost exactly matching the slightly over 20 percent fall in U.S. soybean prices for that period.
The reason is simple: Soybeans are fungible. When China buys Brazilian soybeans instead of American ones, Europeans have to turn to soybeans from the United States to replace their usual Brazilian supplies. There is one, single, undifferentiated global market for soybeans. Squeeze it in one place, and it just pops out in another.
Indeed, the decline in soybean prices is global, and it has nothing to do with the U.S.-China trade war. It’s all about the African swine fever. The majority of the world’s soybeans feed pigs and other animals, not people, and China’s pork producers have been hit with a nationwide fever epidemic.
As a result, Chinese purchases of U.S. soybeans have now stopped completely. That may look like a total soybean embargo. But the reality is that China just doesn’t need as many soybeans, because it doesn’t have as many pigs to feed. As the swine fever continues to rage, look for U.S. exports of pork products to boom.
https://foreignpolicy.com/2019/06/13/china-is-bluffing-in-the-trade-war/
<----- is this really required ?
Considering that China ran a trade surplus of $420 billion with the United States last year, it is obvious that it can’t come close to matching the United States in terms of tit-for-tat tariffs. But it does have other arrows in its quiver. Expert commentary and internet speculation have focused on three: an embargo on imports of soybeans from the United States, an embargo on exports of rare earth metals to the United States, and the diversification of China’s currency reserves away from the dollar.
Fortunately for the United States—and for the health of the global trading system—each of these would be an empty threat.
In 2018, as rhetoric about the trade war took off in earnest, China slapped a punitive tariff of 25 percent on American soybeans. Soybeans are the United States’ biggest farm export, and they are important crops in the Midwestern states that swung to elect Trump in 2016. The 25 percent duty has been widely cited as the root cause of low prices that have led to a wave of farm foreclosures across the U.S. heartland.
The United States’ largest competitor in the global soybean market is Brazil, so one might expect Brazilian farmers to be jumping with joy as they see more demand for their produce. But Brazilian soybean prices have fallen almost 20 percent since April 2018, almost exactly matching the slightly over 20 percent fall in U.S. soybean prices for that period.
The reason is simple: Soybeans are fungible. When China buys Brazilian soybeans instead of American ones, Europeans have to turn to soybeans from the United States to replace their usual Brazilian supplies. There is one, single, undifferentiated global market for soybeans. Squeeze it in one place, and it just pops out in another.
Indeed, the decline in soybean prices is global, and it has nothing to do with the U.S.-China trade war. It’s all about the African swine fever. The majority of the world’s soybeans feed pigs and other animals, not people, and China’s pork producers have been hit with a nationwide fever epidemic.
As a result, Chinese purchases of U.S. soybeans have now stopped completely. That may look like a total soybean embargo. But the reality is that China just doesn’t need as many soybeans, because it doesn’t have as many pigs to feed. As the swine fever continues to rage, look for U.S. exports of pork products to boom.
https://foreignpolicy.com/2019/06/13/china-is-bluffing-in-the-trade-war/
<----- is this really required ?