New Chinese tariffs on US soy could spike aquafeed prices
China’s move to impose a 25 percent tariff on imports of U.S. soy will be a hard blow for the American soy sector, but a boon for Latin American exporters, who have been eyeing increased exports to China, the largest oilseed importer in the world.
The tariffs will likely take some time to hit home, given stockpiles of U.S. soy at Chinese ports, but it appears that Argentina and Brazil – the dominant supplier to China – will seek to grab the United States’ 35 percent share of Chinese soybean imports. China imported 93.5 million tons in marketing year 2016-2017 (September to September), taking 62.6 percent of total world exports and 61.2 percent of all U.S. soybean exports. China’s total oilseeds production stood at 58.5 million tons in the same timeframe.
China has looked positively at American soy in part because the industry was willing to share its knowledge. The U.S. Soybean Export Council (USSEC) has been offering training to aquaculture practitioners across China in nutrition as well as management. In fact, representatives from the USSEC’s Shanghai office were recently in Hangzhou, advising local carp and snakehead farmers on recirculating-water pond systems. Similar training workshops have been offered across the country, conducted in collaboration with local government. For its part, the USSEC has used the training sessions as a tool to open up Chinese demand. It has also stressed the sustainable production of American soy in its marketing efforts in China.
However, that partnership is now in doubt, as China targets an industry that it sees as tied to the administration of U.S. President Donald Trump, according to Shen Jian Guang, an analyst covering the soybean trade at Rui Sui Securities, a Chinese brokerage.
“Many American soy farmers are Trump voters and China’s government will be seeking impact from that fact,” Shen said.
But the importance of soy to China’s aquafeed sector means China has to tread carefully, as any spike in feed prices could filter through to food price inflation, something Beijing is very wary of, according to Shen.
China has other partners, primarily in Latin America, from which it can buy soy. As much of the supply from Latin America is genetically modified, it’s not allowed for direct human consumption, meaning the aquafeed industry should be able to use Latin American imports as a substitute.
There is still a chance the recently announced tariffs – which over the past week have rapidly escalated in number and economic impact – will be called off. President Trump’s top economic advisor, Larry Kudlow, said in an interview on Fox Business Network that the threat of tariffs is “just the first proposal” in a process that would involve negotiations and back-channel talks.
And Cui Tiankai, the Chinese ambassador to the United States, told The New York Times that China preferred to resolve the conflict through talks.
“Negotiation would still be our preference, but it takes two to tango,” Mr. Cui said. “We will see what the U.S. will do.”