US–China trade war may benefit Brazilian soybeans

China has recently unveiled measures against imports from the US as a response to the tariffs imposed on Chinese goods by the Trump administration. The ripples of this trade dispute have reached the Brazilian economy, especially after the increase in the demand for soybeans, one of the US products curbed by China.

Specialists believe that this contest—a result of US President Donald Trump’s protectionist policy—may come to the benefit of some Brazilian industries in the short run, but later on may prove detrimental to the global economy.

Brazil is one of the world's biggest soybean producers and exporters. – Agência Brasil / All rights reserved.

Felippe Serigatti, a researcher at the Agribusiness Center of the Getúlio Vargas Foundation, believes that the issue may lead to lower economic growth in both nations, which would reverberate in other countries as a result. “This is good neither for Brazil nor for the global economy as a whole. It’s a game with no winners.”

Serigatti argues that Brazilian soybeans may profit more quickly from the current state of affairs by serving the Chinese demand, but added that this could undermine the balance with other international partners.  The price of soybeans in Brazil had been sinking below its rate at the Chicago Stock Exchange, which favors its export to China, but could make the price incompatible with the European market, he went on to explain.

“If soybeans in Brazil get pricier, the soybean meal shipped from here will become more expensive, so our price becomes less competitive in Europe. This may come in handy for US soybean meal, as soy is cheaper over there,” Serigatti noted.

A no-win situation

Ambassador Rubens Barbosa, who served in Washington in the early 2000s, agrees that the aggravation of such a contentious landscape would be harmful for everybody. “The price of commodities will rise, affecting everyone, including Brazil. A trade war of such magnitude also brings along with it reduced economic growth and weaker foreign trade,” he recently said on TV Brasil.

In the view of Charles Tang, head of the Brazil–China Chamber of Commerce and Industry, countries like Brazil, Argentina, and Australia should help meeting China’s demand, but this imbalance is likely to harm the global economy over time.

Brazil is the biggest exporter of soybeans to China, he noted. “The US exported some 40 million tons, and Brazil some 50 million. To replace the supply from the US, it would be necessary to nearly double Brazil’s exports,” he pointed out. “The important thing is that China has for the first time understood that the supply from the US is unstable and that this instability is hazardous,” he said.

Competitiveness

Rogério Araújo, Planning and Intelligence Coordinator with the Brazilian Industrial Development Agency (ABDI), linked to the country’s Ministry of Industry, Foreign Trade, and Services, notes that Brazil is ready to seize the opportunities created by the China–US dispute, further claiming, however, that investment is key to making material progress in the market.

“We can achieve that by boosting investment in innovation and in a productive sector that’s been on the rise all across the world—a sector closely related to the digital economy—industry 4.0,” he said.

French daily Le Monde referred to Brazil as “the great winner” in the tariff war waged by the US and China. Brazilian soybean exports are said to benefit from the scenario, and the price of the product in the country is reported to have surpassed the rate at the Chicago Stock Exchange. The Wall Street Journal also mentions Brazil as the actor immediately benefited by the current goings-on, but notes that the country does not produce soybeans enough to feed all of China by itself.