Just a few days ago, COFCO, China’s colossal state-owned enterprise, made a splash. They bought three cargoes of U.S. soybeans at the last minute before a high-level summit. Beijing is not trying to be generous with this move. It’s a definitive signal of their desire to dial back the soaring trade animus with the U.S.
Historically, before the trade war that escalated under the Trump administration in 2017, soybeans ranked as the top U.S. export to China. In just 2016, China imported $13.8 billion dollars’ worth of soybeans from the U.S. Since then, the state of affairs between the two countries has become largely hostile. Consequently, American farmers have suffered major losses in soybean exports. So far this year, China has largely ignored its commitments to purchase U.S. agricultural goods. As a consequence, American producers are incurring huge monetary losses amounting to billions of dollars.
Despite COFCO’s recent purchase, China continues to face a 13% tariff on U.S. soybeans. This tariff has a pre-existing 3% base tariff factored in. Additionally, the ongoing tariffs have made American soybeans a less attractive purchase for Chinese buyers. In the meantime, Brazilian alternatives have become cheaper and more appealing. Traders are not anticipating an immediate jump in Chinese demand for U.S. soybeans. This is true only as long as the tariffs remain in place.
USDA and customs data reveal that in 2024, China purchased only about one-fifth of its soybeans from the U.S. This is down 14 points from the 41% who said so in 2016. The U.S.-China trade war that began before Trump took office continues to rage today. It has sorely tested global supply chains and reoriented the way agricultural trade flows between the two countries. This, in turn, has forced non-Chinese buyers to look more towards Brazilian cargoes, taking even more opportunities away from U.S. exporters.
COFCO’s recent soybean purchases send a strong signal about Beijing’s desire to boost trade relations. This announcement comes just ahead of important high-level negotiations. Without resolution of the tariffs, or the cost advantage of foreign competitors and their exporters, U.S. soybean exports will remain threatened in the near term.