Donald Trump’s first trade war hurt American soybean farmers by $11 billion. The sequel will be even worse.
The grain was the main victim of Trump’s first tariff fight with China, with American shipments to the world’s main buyer of commodity falling 79% in the first two years of his first government. At that time, the Asian nation still needed some American supplies. Now, it can simply live off purchases from rivals, like Brazil.
It’s a similar picture for other commodities, with China diversifying its supplies, opening its market to corn and wheat from Argentina, sorghum from Brazil and cotton from Australia. China’s coffers are bursting — at the same time a slowing economy is hurting domestic demand.
“First, China was not prepared. This time, they are prepared – they have record stocks of soybeans, domestically,” said Steve Nicholson, global grains and oilseeds sector strategist at Rabobank. “The dynamic has changed a little bit.”
The risk of an escalating trade war comes at a time when American farmers are struggling to regain their position as the top exporter of staples, from corn to wheat, following Brazil’s success in gaining market share. Producers are already receiving less for their harvest, with corn and soybean prices hitting their lowest since 2020 earlier this year.
Trump is expected to repeat the playbook from his first term, with tariffs likely to be followed by retaliatory measures from China that would weigh on grain prices. A solution could eventually emerge, but China will have a “lower appetite” to return to previous import levels, analysts at Citigroup Global Markets wrote in a note on Monday.
Most agricultural products “are at the forefront of retaliatory trade moves” because switching sources incurs comparatively lower costs, according to analysts at Bloomberg Intelligence.
The first trade war helped trigger the current supply situation, as China’s move away from the US spurred Brazil to plant more soybeans, with the South American nation clearing land to expand the area under cultivation. Brazil could harvest a soybean crop early next year more than 30% larger than levels seen before the trade war between the US and China.
But abundant global supplies aren’t stopping American farmers from producing more — they just harvested the biggest soybean crop ever amid growing domestic demand. Growers will likely continue to plant even if Trump’s trade war hits demand — after all, the former president threw $28 billion at farmers to cushion the blow during the last trade dispute.
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“We don’t expect a retraction in the planted area in the US,” said Chuck Magro, CEO of seed manufacturer Corteva Inc., which plans to expand its soybean program in Brazil. “Assuming tariffs are similar, where China feels it needs to buy from other markets, U.S. production will still find a place,” he said.
See below how Trump’s tariffs could affect various cultures:
Soy, corn and wheat
In January 2020, the US and China signed a so-called Phase One trade deal, in which China committed to buying billions of dollars worth of American agricultural products and canceling tariffs.
If these tariffs are reinstated, American farmers could lose millions of tons of grain and soybean exports annually, according to a joint study commissioned by the National Corn Growers Association and the American Soybean Association released before the election.
To reduce its dependence on the USA, China approved the import of Brazilian corn in 2022. Recently, the US was sending record amounts of American corn to China, before the pivot to Brazil.
China is also turning to Argentina for corn and wheat. China authorized purchases from the South American country earlier this year, paving the way for the first corn shipments in 15 years and the first significant wheat deals since the 1990s.
Sorghum
U.S. sorghum producers are highly dependent on China, the biggest consumer of the ancient grain that is used for animal feed and to make baijiu liquor. In the most recent season, the US sent the equivalent of around 70% of its sorghum harvest to the Asian country.
But at the end of last month, China also opened its doors to imports from Brazil. Although the South American agricultural powerhouse has barely exported sorghum in the past, its production has increased to around 4.6 million tonnes. This poses another challenge to U.S. market share in addition to the threat of tariffs.
Pork
China has been increasing its imports of American pork products in recent years, although it has allowed in more products from Brazil, while the European Union is also highly dependent on demand from the Asian country.
This makes the outlook for the market less promising, even without a trade war. Pork consumption is expected to decline in China, the world’s largest pork consumer. This comes as consumers shift their diets to other proteins, such as poultry, beef and seafood, according to a report from the U.S. Department of Agriculture.
Cotton
Chinese imports are also expected to decline from last year’s record high due to strong domestic production and rising inventories, the USDA said in a December report. A slower economy has also hurt demand for textiles and clothing, leading to more moderate growth in cotton consumption.
The Chinese cotton and textiles supply chain is “radically different” from what existed during the 2018 trade war, said Walter Kunisch, senior commodities market strategist at Hilltop Securities. “Overall, the Chinese economy is in a different and much weaker position. Politically, China’s trade policy is also in a different situation.”
The country has been sourcing more from Brazil and Australia, although the nation may have difficulty moving away from U.S. cotton, which “remains the gold standard” in terms of quality and traceability, Kunisch said.
Brazil, which became the world’s largest exporter in the year 2023-24, sent almost 1.3 million tons of cotton to China that season, surpassing US shipments.
