China’s soybean supplies are unlikely to be affected in the short term by a potential 25% tariff on US imports on the crop, the country’s agriculture ministry said in response to industry concerns.
In its monthly crop report, the Ministry of Agriculture and Rural Affairs said the domestic soybean market was “highly concerned” about the effects of the escalating trade friction with the US would have on the industry.
A 25% tariff on soybeans was proposed by the China in retaliation for what the government says have been recent aggressive US trade actions amid an escalating trade dispute between the US and China.
A US Soybean Export Council study released last month said soybean exports to China could plunge by almost two-thirds if Beijing proceeds with its proposed 25% tariff.
But China’s ministry of agriculture said South America was the main supplier to China during the first part of the year so any affects would likely be towards the end of the year.
“Further developments and the impact on supply and demand for the whole year must continue to be monitored,” it said.
China imports around US$40bn in soybeans a year, which are crushed to make meal used in animal food and oil for cooking. Around one third of its imports are sourced from the US.
The trade dispute started last month when US president Donald Trump threatened to raise tariffs on Chinese goods worth US$50bn in response to complaints that Beijing forces foreign companies to partner with domestic firms and hand over intellectual property in violation of World Trade Organisation market-opening commitments.
Beijing hit back with its own $50bn list of US goods for possible retaliation, which included soybeans.
Data analysis from the US Soybean Export Council showed the medium-term impact of Chinese import tariffs would fall 37%, with the economic impact on the US amounting to more than $3bn a year, largely in rural areas.
The council study said as the world’s biggest buyer of soybeans, China needs imports from the US, the leading producer, to satisfy demand. However, it acknowledged that as Brazil and other countries in Latin America expand soybean area and production, China will no longer need to rely on the US.
“As other suppliers expand productions, US exports globally will fall,” it said.
Meanwhile, speaking at the Boao Forum for Asia on the southern island of Hainan, Chinese president Xi Jinping pledged to cut China’s auto tariffs and improve intellectual property protection.
“China’s door of opening up will not be closed and will only open wider,” he said.
“We will encourage normal technological exchange and protect the lawful ownership rights of foreign enterprises.”
Although some analysts have praised Xi’s words as the beginning of the end of the trade dispute, Chaoping Zhu, global market strategist at JP Morgan Asset Management, told CNN Money that the remarks did not represent a dramatic departure from existing Chinese policy.
“This speech did not represent a major shift in Chinese policy but rather a reiteration of the same themes Xi has promoted throughout his tenure atop China’s policy making system,” he said.
“It is likely the US-China trade dispute will require more negotiation.”