Trade tensions have once again ensnared US farmers.
Although China’s retaliatory tariffs have been relatively limited thus far, they could escalate.
Moreover, broader trade tariffs mean that US soybean exports to other countries, besides China, are also at risk, ING Group said in a report.
China targets US agricultural products
In response to the US increasing tariffs on Chinese imports from 10% to 20%, China has retaliated with additional tariffs, primarily targeting the US agricultural industry. These new tariffs will range between 10-15%.
Starting on March 10, the US will face additional tariffs on a variety of goods.
Soybeans, sorghum, pork, beef, aquatic products, fruits, vegetables, and dairy products will see a 10% tariff increase.
Wheat, corn, cotton, and chicken will see a 15% tariff increase. The focus of this will be on the impact on soybeans, corn, and wheat.
China currently imposes a 3% most favoured nation (MFN) tariff rate on soybean imports. The MFN tariff rate for corn and wheat imports is 1% for in-quota and 65% for out-of-quota.
The existing tariffs on US agricultural imports, imposed during the 2018 trade war, remain in effect in China.
Tariffs on soybeans
As a result, US soybeans are subject to a 30.5% tariff. Corn and wheat imports face a 26% tariff within quota limits, and a 90% tariff for imports exceeding the quota.
Warren Patterson, head of commodities strategy at ING Group said:
In turn, we believe that China has been fairly restrained in its response; the government could have simply removed the tariff waivers that were provided in recent years, which would have seen imports from the US charged a significantly higher tariff than they are set to be charged from 10 March.
“It’s possible that China is holding back in case the US moves to raise tariffs further,” he added.
Source: ING Research
CBOT prices initially dipped after China’s announcement, but all markets have since rallied.
“It’s possible that China is holding back in case the US moves to raise tariffs further.”
Furthermore, the market may believe that the tariff levels are not as severe as initially anticipated.
China less reliant on US soybeans
The seasonal nature of soybean supply means that the market is entering a period where supply typically shifts from the US to Brazil.
“The impact of these tariffs will therefore be more limited – at least in the short term. US export sales for the current marketing year suggest that of the roughly 21mt tonnes of soybeans sold to China, only 1.5m tonnes remain to be shipped,” Patterson added.
Products in transit have until April 12 to clear China customs.
Source: ING Research
This means that some of these volumes will likely be shipped before the tariffs take effect on March 10. As a result, it is likely that a fairly small volume of US soybean sales to China will be cancelled.
Patterson noted:
When it comes to China’s reliance on US agricultural imports, it is soybeans that receive the most attention and deservedly so.
China imported 105 million tonnes of soybeans in 2024.
Although 21% of this total originated from the US, China has been increasingly relying on South American suppliers, particularly Brazil, to reduce its dependence on the US, according to ING.
China’s position in a potential trade war is stronger than it was in 2018. This is due to a decrease in reliance on the US for soybean imports; in 2017, 34% of Chinese soybean imports came from the US.
US soybean exports heavily dependent on China
However, the US remains heavily reliant on China, despite a decrease in dependency over time.
The US has shipped 37 million tonnes of soybeans so far in the 2024-25 marketing year.
Out of which, 52% went to China, a decrease from the pre-2018 trade war share of 62%.
The share of US soybean production being exported has also decreased due to expanding domestic crush capacity, driven by increased biofuel sector demand. But, it is still a hefty amount.
US farmers can adjust their planting plans for the 2025/26 crop as a response to the timing of the retaliatory tariffs, although these tariffs will still be a concern, ING said.
“Prices were already telling US farmers to reduce soybean plantings and increase corn plantings.
These tariffs will likely only reinforce that view and increase the potential for an even larger shift from soybeans to corn plantings this spring.”
To prevent a surplus of US soybean stocks, CBOT soybean prices may need to stay low relative to corn prices, encouraging farmers to adjust their planting decisions.
Source: ING Research
Trade flows at risk
The US is facing retaliatory tariffs not only from China but also from other key agricultural trade partners, particularly Mexico.
Mexico is the largest importer of US corn and wheat, and the third largest importer of US soybeans.
US farmers could be negatively impacted if Mexico decides to retaliate by targeting these commodities, according to Patterson.
Further developments on Mexico’s response are expected to be clearer over the weekend.
The quantities of US soybeans, corn, and wheat that are transported to Canada are insignificant, and therefore have a minimal effect on overall trade flows, Patterson noted.
Higher costs of US farmers
The risk of increased input costs for farmers due to US import tariffs is most apparent in fertiliser costs.
However, as the reliance on imports for nitrogen and phosphorus fertilisers is relatively low, and the share of imports from Canada, Mexico, and China is also small, the impact of tariffs on the cost of these fertilisers should be minimal, Patterson added.
The US imports approximately 90% of its potassium fertiliser, with over 80% of that amount originating from Canada.
“This is a concern for farmers as they will face rising costs and lower prices for their output, which would squeeze margins,” Patterson said.
However, it was likely that some front-loading occurred in anticipation of the tariffs taking effect.
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