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The US-China trade war and Brazil

The US-China trade war and Brazil

For years, Arnaldo Carneiro stuck to his master plan to contain deforestation in Brazil. Carneiro’s studies demonstrated the complicity of importers of Brazilian soybeans in the degradation of the environment.

He implored them to purchase only from farmers who could guarantee they did not clear land for cultivation.

The strategy always worked better in Europe. In 2015, seven European countries signed the Amsterdam Declaration committing to support private sector initiatives against deforestation in their production chains.

“Europe is a slightly more conscious market”, says Carneiro, who directs the NGO Global Canopy. “They are concerned with impacts on the front line”.

Now, however, Carneiro’s strategy has suffered a big setback that has renewed concerns for Brazilian forests: the US-China trade war.

As the world’s two largest economies began to impose tit-for-tat tariffs on a range of imports in March this year, China hit US soybeans – a heavily traded commodity – with a punitive 25% levy. Since then, Chinese demand for Brazilian soy has spiked.

The trade war has also kick-started a game of musical chairs between soybean purchasers and producers. Chinese buyers have increasingly switched to Brazil to avoid the high tariffs imposed on US products.

Meanwhile, European dealers have flocked to the US as prices slumped for their soybeans, which flooded the market after losing eager Chinese customers.

Historically, China has accounted for approximately one-third of US soybean consumption. Chinese people have increasingly stronger purchasing power and want to eat better.

Soybeans play an important part in food production since they are fed to Chinese pigs.

In June this year, 37% of soy imported to Europe came from the US, an explosive increase compared to 9% last year.