Potential impacts of US-China trade war 2.0 on soybeans

RaboResearch anticipates significant uncertainties in US-China trade relations under Donald Trump's second term, with a high likelihood of renewed trade war escalation, although negotiations might precede immediate tariffs.

If additional tariffs are imposed, China is expected to retaliate immediately, targeting grains and oilseeds, especially soybeans. However, the impact on China's soybean market may be less severe than during the 2018-2019 trade war due to: (1) higher state reserve inventories, (2) increased imports from Brazil, and (3) China’s growing adaptation to low-protein feed formulas, which reduce soymeal use and the need for imported soybeans.

US soybeans are now becoming less reliant on exports, with domestic crushing expanding rapidly due to surging demand for renewable diesel. RaboResearch doesn’t foresee drastic changes in US biofuel policies under Trump’s second administration.

US soybean exports remain significant in volume, with China as the largest trade partner. A renewed trade war would potentially lower US farmgate prices by USD 1.50 to USD 2.00 per bushel and reduce soybean acreage by up to 5m acres.

Even in the event of a full-blown trade war, multiple truce talks are likely in 2025. Despite potential retaliatory tariffs, China might still purchase US soybeans in small batches as a goodwill gesture to facilitate trade negotiations.