The announcement from China on the tax on agricultural products carries with it both economic and political strength, as key agricultural states are big supporting regions for Trump.


The import tax on US soybeans will be 25%, typically the Chinese  sound like a major deal, and it could well turn into one, but its worth remembering that China typically does not import a large volume of US soybeans during the Apr-June period, as it switches to the cheaper supply from newly harvested soybeans in Sth America.


So it would appear China has been very savvy in its announcement,  values in anticipation of demand switching from the US, overall it will not have a major impact on their import costs in the short term, giving them  agreeable settlement.


 soybean crushers, animal feed producers and consumers, however, longer term given the much-reduced Argentine soybean crop this year, 


China is the world’s biggest pork producer and, as such, very reliant on soybean meal to feed its pigs. With the Argentine soybean crop drastically reduced from last year, China will be more reliant this year on the imports of soybeans to crush in its own facilities to meet the demand. These rising costs for the pig farmer will increase the cost of pork, which is a key component of China’s CPI.


It is not just soybeans that the market needs to focus on, China accounts for 80% of the US’s sorghum exports, worth around $1 billion and US exports of cotton to China totalled $5.8 billion in 2017.


 the outcome, and these reactionary events are causing havoc in the markets, increasing volatility and making for some very uncertain times.


CHINA, IN RESPONSE TO TRUMP’S LATEST DIRECTIVE HAVE VOWED TO “FOLLOW SUIT TO THE END, AND AT ANY COST, AND WILL FIRMLY ATTACK USING


COUNTERMEASURES”.


There is no doubt that trade is  do not really matter and, as a rule of thumb, the country that  more so if it faces retaliation.


Whilst it seems clear that trade wars ultimately have a negative  economy, in the short term at least there should be some  trade war between China and the US.


As previously mentioned, Brazil will hope to capitalise with increased soybean exports. However, Brazil has a very strong internal demand for soybeans and so will not be able to completely replace all the volume that the US currently exports to the US.


India, the worlds 2nd biggest exporter of cotton after the US, will hope to treble its exports to China in any escalation of this trade war.


28 | ADMISI - The Ghost In The Machine | March/April 2018


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