When President Donald Trump launched his first trade war with China in 2018, the impact was swift. Soybean prices plunged from $10.21 a bushel that June 1 to $8.34 by July 13. USDA, within days, announced a $12 billion compensation plan for farmers.
This time, Trump and China have imposed even higher tariffs on each other, but with little or no impact on prices of soybeans, cotton and other commodities that are heavily exported to China.
Economists say the impact on U.S. farmers is coming but may not be felt until fall, giving Trump officials more time to reach some kind of deal with China to lower or remove the latest tariffs.
Even then, farmers who’ve bought revenue insurance will be protected to some extent against a price decline this year. Soybeans could be insured this year at $10.54 a bushel, a few cents above where soybean futures have been trading this week.
Prices for commodities such as cotton, sorghum and wheat also are close to the levels where they were when Trump took office in January.
Economists say there’s still a lot of uncertainty in the industry about how long tariffs will stay in place, and that’s serving to keep prices relatively steady.
“We’ve seen these tariffs get announced and two days later get suspended,” said Joe Glauber, a former chief economist at USDA.
Scott Gerlt, chief economist for the American Soybean Association, said, “My guess is that the traders think there's some probability of this getting resolved, and so that's what's going on.”
In fact, Bloomberg reported that Treasury Secretary Scott Bessent said at a closed-door investors summit Tuesday that the situation is unsustainable and likely to de-escalate even though negotiations haven't started.
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Another factor behind the lack of market reaction to the tariffs: China has rushed into the market in recent weeks to buy up Brazilian soybeans, said Dan Basse, president of AgResource Co.
Dan Basse (LinkedIn photo)“China has just bought the table, to use a term poker term, down in Brazil, and now they are in a different mindset,” Basse said.
The Chinese are clearly assessing that American soybeans may be too expensive for their tastes this fall when the U.S. crop hits the market, according to Basse. China bought about 70 cargoes of soybeans the week before last.
“They're now looking at the hole that would be U.S. exports, probably from the middle of September through the end of December, maybe middle of January, and they're trying to find, you know, 'Can I go out there and buy enough Brazilian soybeans to get enough supply around me so that when I get to that hole, I'm not paying 145% tariffs,'” he said.
AgResource estimates China will import at least 14 million metric tons of soybeans in April and May – almost all of that from Brazil – compared to less than 4 million tons in March and well above the pace of imports this time last year. China imported about 10 million tons last May and under 9 million in April 2024.
Another factor holding up commodity prices is that Trump didn’t raise tariffs on Mexico and Canada, the two biggest markets for U.S. ag commodities, Basse said.
Still, a new analysis by Glauber and colleagues at the International Food Policy Research Institute estimates that the trade war with China, if it continues, will reduce soybean prices by 11% and cut U.S. oilseed exports by 39%.
The projected impact is in line with estimates from the American Soybean Association and the National Corn Growers Association last October, just before the election. The groups said that a 60% tariff on U.S. commodities would cut the price of U.S. soybeans by nearly $1 a bushel and cut the corn price by 13 cents a bushel, while raising prices for farmers in Argentina and Brazil.
Trump’s new “125% tariff would likely have large impacts on global oilseed trade flows. … It would make U.S. soybean imports prohibitively expensive for China — reducing them to near zero,” the analysis says. Chinese demand would raise prices paid to suppliers in Brazil and Argentina while lowering them for U.S. producers, the analysis adds.
The analysis also notes that China has drastically increased dependence on Brazilian soybeans over the years, providing some insulation from Trump’s tariffs. Brazil’s share of the Chinese soybean market grew to 45% by 2016 and then jumped to 75% in 2018 as Trump’s first trade war kicked in.
Brazil still accounts for 71% of the Chinese market, compared to the U.S. share of 21%, which is down from 40% in 2016.
If there’s a bright side for U.S. farmers, it may be the timing of the tariffs, assuming they eventually come down.
“The reality is that we're entering into a part of the part of the season where we don't export a lot of U.S. soy,” said ASA's Gerlt.
It “gives us a little bit more time. If this were occurring late fall, we would have very immediate, very fast, dramatic impacts. But we're at the time of year where this has less effect,” he said.
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