Renewed trade war could cut off China’s access to US soybeans – Rabobank

A renewed trade war would have less of an impact on the Chinese soybean market than it did seven years ago, but could completely shut U.S. soybeans out of the Chinese market, according to a new report from RaboResearch.

China will likely retaliate immediately by targeting grains and oilseeds, particularly soybeans, if President-elect Donald Trump imposes additional duties.

During Trump’s first term, retaliatory duties resulted in more than $27 billion in losses for U.S. agricultural exports, with $25.7 billion directly attributable to duties imposed by China, Nicholson said.

While there are lessons to be learned from the 2018-2019 trade war, there are new dynamics that must be considered to assess potential impacts, according to the report, “Potential Impacts of the U.S.-China Trade War 2.0 on Soybeans.”

Compared to the 2018-2019 trade war, China has higher government reserve stocks, has increased imports from Brazil, and is adapting to low-protein feed formulas that reduce soybean meal use,

“In response to the unpredictable and complex nature of geopolitical uncertainty, the Chinese government has been actively implementing policy measures in recent years to better prepare for potential disruptions,” says the study, co-authored by Stephen Nicholson, global industry strategist for grains and oilseeds at Rabobank.

Since the last trade war, China has increased domestic production by 5 million tons as part of its national soybean revival plan. It has also built up state reserves, with ending stocks rising by 20 million tons from 2021-2022 to 2023-2024.

China’s soybean meal consumption has stalled, mainly due to the government’s promotion of low-protein feed formulas, the report said. Official Chinese data shows that the inclusion rate of soybean meal in feed formulas fell to 13% in 2023 from 17.3% in 2019.

China relies heavily on Brazil for soybeans. Brazilian soybeans accounted for 74% of China’s soybean imports in 2023-2024, the same level seen at the height of the trade war, the report said. With a significant recovery in Brazil’s soybean production in 2024-2025 and a possible resumption of the US-China trade war, Brazil’s share of the Chinese soybean market could increase to 80% or more.

All these factors create a scenario in which U.S. soybeans could be excluded from the Chinese market in a new trade war, the report said.

Circumstances have also changed in the U.S. domestic market with new processing plants coming on line. While this will mitigate some of the losses, it will only amount to about a 25% reduction in U.S. soybean sales from the U.S. to China.

In addition, there could be a $1.50 to $2 per bushel reduction in the average national price received by farmers, which would reduce cash soybean prices to below $9 per bushel. Planted acreage is also expected to decline by 5 million acres, the report said.

The Trump administration distributed $28 billion through the Commodity Credit Corp. (CCC) in 2019 and 2020 to largely mitigate the impact of low prices on farmers. It’s unclear whether similar compensation will be provided since Trump is not running for re-election in 2028, and spending from CCC funds is attracting more scrutiny and oversight.

“Therefore, U.S. farmers are likely to suffer more losses themselves this time around,” the report said.

In addition, a potential trade war could have spillover effects on global amino acid prices. High prices and reduced supplies could prompt Chinese feed mills to replace some soybean meal with feed grade amino acids.

“As the world’s largest producer and exporter of most feed amino acids, China could see domestic consumption rise amid a renewed trade war,” the report said. “This could potentially trigger higher prices for amino acids such as lysine, methionine and threonine.”

Tags: China, soybean, USA, restrictions