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The Long-Term Damage of U.S.-China Trade Dispute

While China hasn’t implemented a proposed 25% tariff on U.S. soybeans, the damage to America’s relationship with its No. 1 soybean purchaser may already be done. “Good reputations take years to accumulate and moments to evaporate,” says Mike Steenhoek, executive director of the Soy Transportation Coalition.

At a recent meeting at Successful Farming, members of the Iowa Soybean Association (ISA) shared their concerns about the growing trade dispute between China and the U.S. China is America’s largest soybean customer, importing $12 billion worth of U.S. soybeans last year.

“The long-term impact on Chinese desire to buy American products bothers me most,” says Kirk Leeds, CEO of ISA, who has been to China multiple times on trade missions. “If China continues to pay a premium for South American soybeans, that will cause expansion in Brazil.”

Preference for South America

An increase in Brazil soybean exports to China could outlast the back-and-forth between D.C. and China, says Grant Kimberley, director of market development at ISA.

“Once there’s a preference for Brazil’s soybeans, it will be hard to get that back. We will be relegated to a residual supplier that’s there only when they need us,” says Kimberley. “Brazil is seen as a more long-term stable partner, and they have the acres to grow.”

The preference for South American soybeans can be implemented more easily in China with its number of state-owned companies. “A relatively small number of people can tell state-owned companies to consider buying Brazil’s soybeans, which could be subsidized,” says Leeds. “If you don’t have free markets and have government control, as a matter of policy for the best interests of the government, you’ll buy Brazilian soybeans whenever possible.”

Weakening Relationship

In addition to competition from South America, the growth of nationalism in China as well as anti-Americanism sentiment are real and have long-lasting implications, adds Kimberley. This has the potential to undo the relationship American farmers have worked to build with China for more than 30 years.

Kimberley has seen this happen firsthand. His family’s farm in Maxwell, Iowa, is the model for the new China-U.S. Demonstration Farm in Hebei, China. While the farm will plant its first corn crop this year, Kimberley says the strained relations between the two countries may impede progress on the farm.

“This is known as the China-U.S. Friendship Farm and from their view, we aren’t being very good friends,” he says.

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