An Illinois farmer plants soybeans. Soybeans are once again in the crosshairs of the U.S. trade war with China, with Brazil, Argentina and Russia bit players in the saga.
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For the first time in two decades, China bought no soybeans from the United States for two consecutive months and, more importantly, has no orders in for the coming peak season.
Prior to President Trump initiating his trade war with China during his first term, it bought more than half of all U.S. soybean exports, with up to 70% coming during the peak October through January season.
Until January of this year, U.S. exports had topped $1 billion in 54 of the previous 62 peak months, with seven of those eight months in the previous Trump administration.
With Trump back in office, that trade war escalated earlier this year, with the president threatening to impose tariffs as high as 145% at one point and China countering by suggesting it would increase its retaliatory tariffs on exports from the United States to 125%.
Fortunately for the world’s two largest economies and the United States’ third-largest trade partner, cooler heads prevailed. At least temporarily. Trump has twice paused the tariffs he threatened to add this year, with the second extension due to expire in early November.
Ahead of that deadline, in what looks like a negotiating strategy, total soybean exports to China dropped to zero in June and July. That’s the first time the total had dropped to zero for two straight months since the spring and summer of 2004, according to my analysis of the most recent U.S. Census Bureau data.
Through July, U.S. soybean exports to China are down 51.29%, which is equal to $2.6 billion. To the world, those exports are down a still-substantial 23.26% while overall U.S. exports are increasing 4.51%.
It’s not just soybeans. Overall U.S. exports to China are off $16.50 billion, which is equal to 20.61%. The decrease in value and percentage are greater decreases than for any other top 25 U.S. trade partner, which handle just under 85% of all U.S. exports.
In addition to the steep decline in U.S. exports of soybeans, exports of highly volatile crude oil are down $4.22 billion, 87.09% by value; U.S. exports of passenger vehicles are off $1.66 billion, equal to 51.24%; and liquid natural gas exports are down $1.08 billion, 31.51%.
China targeted all four commodities, including soybeans, as retaliation in the first trade war and appears to be doing so again. The U.S. tariffs against China are more broad-based.
The result so far has been that U.S. imports from China have fallen precipitously, as has the U.S. deficit with China (while the overall U.S. deficit has continued to increase). China, once the top-ranked U.S. trade partner now ranks third.
The trade war also crosses over into the broader global geopolitical puzzle.
China is buying less U.S. oil because it is buying more oil from Russia, which is under severe U.S. and Western sanctions over its invasion of Ukraine. In addition, China is buying soybeans from Brazil and, to a lesser extent, Argentina.
China has placed no orders for U.S. soybeans as the peak season approaches, and 95% of its early-season needs have been met by Brazil, which, since it is in the Southern Hemisphere, has a nearly opposite peak season.
In addition, Argentina temporarily eliminated its export tax on grain exports and China sourced soybeans from it as well. The United States, Brazil and Argentina are the three largest soybean growers in the world.
Trump has raised the tariff rate on Brazil to 50%, with numerous “carve outs” or exempted commodities, presumably over its sentencing of former president Jair Bolsonaro to 27 years in prison and is working on a $20 million financial rescue package for Argentina and its president, Javier Millei. Both Bolsonaro and Millei are Trump allies.
But Trump and U.S. soybean farmers could be angry at both South American nations.
The purchases from Brazil and Argentina come as the U.S. peak season approaches. Until January of this year and beginning in 2009, U.S. soybean exports to China had topped $1 billion in each of the four months of the peak season – October through January – 54 of the last 62 months. All but one of those eight exceptions occurred during Trump’s first term. The other was a $991.92 million total in December of 2023.
The only time U.S. exports to China dropped to zero during those four months, during the peak season, was in November of 2018. What remains to be seen, with no advance purchases on the books and with Brazil and Argentina boasting their exports, is whether U.S. exports of soybeans to China will once again drop to zero during the peak season, just as the latest pause in the trade war comes to an end. China traditionally accounts for 50% to 70% of U.S. soybean exports during those months.