Aside from nifty new technologies and environmental issues, one story has dominated ag news over the past two years: trade wars pitting the United States against its most important global competitor, China.
Determined to force China to adopt fairer commercial policies and to counteract piracy and security concerns, the President has enacted high tariffs on Chinese raw materials and manufactures. In retaliation, Beijing has hit American farm products with its own tariffs, effectively taking a $20 billion export market off the table.
Much reporting has analyzed the ongoing negotiations between the American President and Xi Jinping to end the standoff. There’s been a dollop of coverage highlighting the effects of this diplomatic clash on the average American farmer. Experts have openly opined that government subsidies to support struggling farmers affected by the trade wars are too meager or too generous.
Much reportage, then, has focused on the trade wars as a catastrophe requiring a disaster response. It’s not hard to see why. When a huge trade partner stops buying your products, you’re vulnerable to huge losses.
But not enough news outlets have taken notice of the creative dimensions of these trade wars–how diplomatic brinkmanship between the U.S. and China is helping forge new trade relationships around the world.
When China and the United States began exacting higher tariffs as a way to force negotiations, a $20 billion export market disappeared. That was a gaping loss. But in our globalized commodity markets, one nation’s loss becomes another nation’s gain. The trade wars aren’t destroying networks of agricultural exchange so much as they’re reconfiguring them.
China isn’t just going to do without $14 billions of dollars of soybean imports; it’s going to seek out new producers of soy, even if it does reduce its aggregate consumption. That’s a windfall profit for countries like Brazil, which are seeing demand for soybeans multiply from Chinese demand.
Likewise, other buyers have begun snapping up soybeans at lower prices after China stopped buying American soybeans. Here again, Brazil just keeps on winning. It’s getting a 20% discount on the foodstuff, the lowest price seen in two decades.
To recap: Brazil is winning the unfolding trade wars between the United States and China. Its farmers are stepping in where American soybean producers left. And it’s buying up American surplus at bargain-basement rates.
The lasting consequences of this situation remain to be seen. If the two sides of the Sino-American trade conflict can come to the table and resolve their differences, Brazil’s gaming of international trade may be a short-term opportunity. As long as Brazil doesn’t overplay its hand and over-invest, it stands to come away ahead.
If the trade wars drag on or enter a new phase, however, we could be witnessing a lasting realignment of trade relationships.
In either case, the future for the United States and China remains unclear. The mutual damage inflicted may be irreparable, and the diplomatic course irreversible.
That makes Brazil the official winner of the dispute–at least for now.