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China’s most powerful weapon in Trump trade war may backfire

China’s most powerful weapon in Trump trade war may backfire

BEIJING:  As tensions escalate between the United States and China, one crop is emerging as the most powerful weapon in a potential trade war: the soybean. China is the biggest buyer of American soybeans, picking up about a third of the entire US crop, which it uses largely to feed 400 million or so pigs.

Chinese President Xi Jinping’s administration is studying the impact of restricting soybean imports in retaliation for US tariffs on washing machines and solar panels, people familiar with the situation told Bloomberg last week. Any China soybean curbs would directly hit farmers in midwestern US states that President Donald Trump needs to win re-election in 2020. Using soybeans to retaliate against the US would be a worst-case scenario” for China, said Mr Li Qiang, chief analyst with Shanghai JC Intelligence Co, a private grains consulting firm. “Pork is a staple meat for Chinese people.”

China’s Commerce Ministry said on Wednesday (Feb 14) it can initiate an investigation on its own or upon requests from domestic industries if there’s evidence that imports have been dumped or subsidised. According to the WTO rules and China’s related laws, before an anti-dumping or an anti-subsidy case is filed, Mofcom (Ministry of Commerce) has the obligation to keep silent, and cannot reveal relevant information to the public,” the ministry said in a reply to faxed questions. On pig farms in rural Tianjin, some 200km from Beijing, concern is growing. Standing next to a sow delivering piglets, Mr Shi Ruixin said his costs would increase sharply if China squeezed US soybean imports. Hog feed prices will rise as well as pork prices,” the 68-year-old farmer said. The seasonality of the soybean trade is one reason that China can’t easily replace US supply, even though authorities in Beijing have sought to diversify. Last year, China’s imports from Brazil rose 33 per cent to about 51 million metric tons, while those from the US fell 3.8 per cent to 33 million tons. Mr Sun Chao, the president of Tianjin Tianjiao Group — the hog feed producer that supplies Mr Shi   said that US soybeans meet Chinese demand from October to February, when the South American crop is still growing. US supplies can’t be replaced,” said Mr Sun, a 20-year veteran in the animal-feed industry who manages a cooperative with 150 farmers and 30,000 pigs. “We rely on each other.” Chinese officials began looking into measures against soybeans in January as trade tensions with the Trump administration began to heat up. The Commerce Ministry held a meeting with some Chinese companies to get feedback, and no conclusions were reached, Bloomberg reported earlier this month. Any final decision would be made by senior Chinese leaders. We are extremely concerned by suggestions that US exports, including soybeans, may face unjustified trade restrictions,” US Agriculture Secretary Sonny Perdue said in a statement. American farmers are facing serious economic challenges without having to face bogus barriers erected strictly for political purposes. We are examining all tools available to us to assist our stakeholders.” Mr Trump has sought to close atrade gap in goods with China that surged 8.1 per cent last year to a record US$375 billion (S$494.70 billion), according to Commerce Department data. Besides the duties on imported solar panels and washing machines, the administration last year began a probe into China’s aluminum and steel sales and its intellectual property practices. China has responded by launching an anti-dumping and anti-subsidy investigation against US shipments of the grain sorghum, a substitute for corn.