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US-China trade war threat analysed

Oscar Rousseau

By Oscar Rousseau+

22-Mar-2017
Last updated on 22-Mar-2017 at 10:15 GMT2017-03-22T10:15:22Z

A potential trade war between Donald Trump and Xi Jinping may hit pork trade
A potential trade war between Donald Trump and Xi Jinping may hit pork trade

The threat of a trade war between two of the world’s most powerful countries China and the United States is low, but analysts warn it could dramatically damage pork trade.

US-China relations are at the edge of a dangerous new era as Donald Trump’s rhetoric stirs volatility, with concern rising that a trade war between the two countries could actually take place.

Netherlands-based Dutch firm Rabobank claims a dispute over trade transformation into a fully-fledged trade war are “low”. Still, analysts at the company have started scoping out the what-ifs of a trade war, particularly the impact on soybeans and pork.

Any actions by the US could be retaliated by China, and the impact could be significant price volatility in the short term, to changes in trade flows and supply chains in the longer term,” said Ping Chew, head of RaboResearch Food & Agribusiness Asia.

Rise in illicit trade

China is one of the world’s largest pork importers. Last year it bought 215,000 tonnes (t) of pork and imported 1.62mt of pork-related products overall. Rabobank claims a trade war between China and the US could see pork shipments suspended due to technical issues or by hitting America with anti-dumping duties.

This could lead to a big surge in trade through China’s grey channel , which already plays a key role in beef and offal trade in the country.

The loss of trade with the US could be an opportunity for the EU and South America, Rabobank claims, as these nations have the extra volume and would be able to fill any trade gap created by the departure of the US.

South America could also benefit from the US being frozen out of China’s soybean trade. China is the world’s largest soybean importer, accounting for 60% of trade. Brazil exported around 42mt of soybeans to China, making it the largest exporter. The US is in second place, with annual soybean shipments to China of 34mt. Uruguay and Argentina are the other key exporters in the market. If China boycotted US soybeans, South America would be the sole supplier to meet Chinese demand.

Rabobank said any ensuing trade dispute, leading to a trade war, could impact price movements and dent global supply and the operation of food chains in the long term.

The consequences are major in these ‘what-ifs’, but we sincerely hope calmer heads will prevail,” added Ping.

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