Soybeans: Where The Trade War and Brazil’s Controversial President-Elect Meet Russiagate

Brazil is currently the largest exporter of soybeans to China while the US has traditionally not been far behind. That said, the US soybean industry was the first hit by Donald Trump’s trade war against China. As part of Beijing’s policy to reciprocate Washington’s tariffs with couter-tariffs, new trade ramparts to US soybean exports have been erected by Beijing. At the same time as the US trade war against China gets underway, the world has witnessed the meteoric rise Brazil’s soon to be President┬áJair Bolsonaro – a man who ran a campaign rife with Sinophobic rhetoric. While some of this campaign rhetoric has tended to smooth over in recent weeks, it remains to be seen whether Bolsonaro will follow his political hero Trump down the path towards hostility against China – something that could result in the collapse of Brazil’s productive soybean exporters.

As China continues to monitor political developments in the western hemisphere, Chinese importers are simultaneously looking towards fellow Asian nations with which to strike new agreements to import soybeans, pork and other staple foods.

Russia’s long serving Premier Dmitry Medvedev recently visited the first China International Import Expo (CIIE) in Shanghai as part of a high level delegation which promoted Russian goods to China’s buyers. During discussions with high level Chinese officials, Medvedev spoke of the possibility of Russia becoming a top agricultural exporter to China.

Perhaps counter-intuitively, European Union sanctions which prevented Russians from buying popular European agricultural products, have led to a renaissance in Russian agriculture. With Russian grain production reaching peak levels in recent years and with Russia currently operating a programme offering free land to anyone seeking to cultivate it, Moscow’s is clearly operating under a strategy to turn its agricultural market into one tailored for profitable exports.

As China is a major national consumer of foodstuffs, Russia’s position as a neighbour and close geopolitical friend of Beijing makes it an ideal partner to not only put food on Chinese tables but to offset the Trump trade war and unpredictable political developments in Brazil. Beyond this, Russian and Chinese trade continues to grow on an annual basis. With China entering into a free trading agreement with the de-facto Russian led Eurasian Economic Union (EAEU) beginning in 2019, both countries look to increase trade and bilateral economic cooperation ever more in the coming years. The US trade war against China and its related sanctions drive against Russia has only served to heighten the intensity of the growing economic partnership between the two Asian superpowers.

As the world’s largest economy in terms of Purchasing Power Parity (PPP) and one whose growth rates continue to exceed expectations, Donald Trump’s assessment that a trade war would be “easy” to win against China was always fanciful. In reality, China’s exports to the US actually grew over the first three quarters of 2018 while US farmers have been forced to take subsidies from Washington due to losing out on lucrative trade with China.

In this sense, while Russia’s economy continues to lag behind both its Chinese partner and its de-facto US rival, policies of the US administration that were designed to weaken China have had little effect on the world’s most dynamic economy while at the same time they are actually helping Russia to modernise its own industries in order for them to more efficiently supply the growing Chinese market.

The trade war has also seen an ever so slight rapprochement between India and China as New Delhi was shocked to learn that its growing military alliance with the US did not result in being exempted from tariff barriers to the US market. Simultaneous to this, as part of China’s long standing goal of fostering a rapprochement with India, Beijing is opening its market to more agricultural imports from India, including soybeans.

Thus, the law of unintended consequences is very much at play in respect of the trade war, Brazil’s sharp turn to the US style political right as well as Russia’s eagerness to strengthen its own increasingly export driven agricultural industry. An array of US policies designed to economically retard the growth of China, crush Russia and turn India away from perspective Asian partners is actually having the opposite effect. All the while, unsold soybeans continue to rot in storehouses across middle America while US taxpayers foot the bill.

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