Speculation about what the U.S. presidential election will mean for trade with China has been a hot topic in the soybean market with Election Day just days away. We don’t believe futures prices have been turning with each shift in the latest pre-election polls as some news reports have seemed to suggest. However, there is certainly reason for the market to be concerned, given the recent history of U.S. soybean trade with China, the largest U.S. soybean supplies in several years, and prospects for stiff export competition from Brazil to continue rising.
In the top chart immediately below, of total annual U.S. soybean exports and U.S. exports to China, the years 2018/19 and 2019/20 stand out, and not for a good reason. Those, of course, were the years China slapped a 25% import tariff on U.S. soybeans in retaliation for U.S. tariffs on Chinese goods initiated by the Trump administration. U.S. soybean exports to China plunged to a 12-year low of 493 million bushels in 2018/19, falling 49.5% from 2017/18 and 59.7% from the record high of 2016/17, while U.S. ending stocks soared to a record high 909 million bushels and the average soybean price slid to $8.48 per bushel.
U.S. soybean sales to other countries did expand in 2018/19, partially offsetting the loss of Chinese demand. As shown immediately below, the share of U.S. soybean exports going to China plummeted to 28% in 2018/19 from 61% a year earlier. However, total U.S. soybean exports for 2018/19 fell 17.9% to a six-year low. Exports to China recovered moderately in 2019/20 but total exports actually fell further as U.S. shipments to the rest of the world slumped amid the COVID pandemic. U.S. soybean exports to China bounced back strongly in 2020/21 to a near-record high of 1.305 billion bushels after China removed its tariff, pushing total U.S. exports to a record high, but total exports have since declined three consecutive years amid high prices, surging Brazilian production and persistent trade tensions with China.
There has been much talk the return of President Trump to the White House would be negative for U.S. soybean sales to China, due to his stated intentions to levy high import tariffs on Chinese goods. While a win by Vice President Kamala Harris would limit impact. However, things are not that simple. The Biden Administration continued tariffs on Chinese goods, initiated during Trump’s presidency and recently increased some of those tariffs. There is no reason to think that policy would change under a Harris administration.
The U.S.-China trade war is expected to continue for some time, regardless of which candidate wins the election. A model developed by economic researchers at Rochester University predicts only a 17% chance of the trade war ending in 2025 with a likelihood it will last another four or five years.
