“I’ve made it very clear to President Xi Jinping that China must quadruple its purchases of soybeans from the United States. Not just buy a little more, but a lot more,” growled Donald Trump in August. But it was he, not Xi, who started the trade war.
For decades, soybeans have been one of America’s largest export products to China. They are used in animal feed, oil production, and numerous industrial processes. The country’s growing middle class has also fueled demand. About two-thirds of all American soy has ended up in China.
Now it is harvest time in the “soy belt.” Heavy machinery does much of the work, but thousands of laborers are also engaged in processing and storing the crops. But who will buy them? Fortunately, soybeans can be stored over the winter. Across the Midwest plains, thousands of silos rise like spaceships ready for launch.
Before the trade war began in 2018, the U.S. exported $12–14 billion worth of soybeans to China annually. This made soy the single most important item in their trade relationship. The partnership soured when Trump escalated the trade war the following year. To hit the U.S. where it hurt most, China responded by raising tariffs on American soy.
That was the beginning of the downturn for Midwestern soybean farmers. Exports fell from 32 to 16 million tons in a single year, and the loss has never been recovered. This year, China’s signals have been even clearer, and since June it has not bought a single soybean. The decision is no coincidence. At a time when the U.S. appears increasingly unpredictable, the Chinese are turning to other, more stable markets.
The biggest winner in this shift is Brazil. With its vast agricultural potential, the country has quickly taken over the role as China’s main soybean supplier. Last year Brazil produced 169 million tons of soy, compared to the U.S.’s 119 million tons. Major investments in infrastructure have made it easier to transport beans from producers to port cities. Argentina, itself plagued by economic crises, has also tried to increase production. Meanwhile, Russia and several African countries have begun to see opportunities in soy as part of their export strategies.
This is good news for China, but for farmers in Iowa, Illinois, Minnesota, Indiana, and Nebraska, life has become bleaker. Many face falling incomes, mounting surpluses, and growing debt burdens. Federal subsidies have softened the blow, but not removed it.
“We feel like pawns in a political game,” a farmer in Iowa told The Wall Street Journal. “Washington talks about grand politics, but we’re the ones left with full silos and empty bank accounts.”
The Midwest is the heart of Trump’s voter base, and the farmers’ frustration could have serious consequences for the president’s support. Several commentators point out that China has considered precisely this. Beijing’s strategy illustrates how food and raw materials are used as weapons in geopolitics. By cutting off imports of American soy, China is sending a clear signal: the U.S. cannot take for granted that China will always be a willing customer.
In early November, midterm elections will be held in the United States. Voters will choose who sits in the House of Representatives and fill one-third of the Senate seats. They will also elect state legislatures and local councils. With their soybean farmers and strong agricultural interests, the seven Midwestern states could quickly become “swing states,” decisive for the election outcome.
The U.S. has long been the world’s largest exporter of agricultural goods, but if new markets cannot compensate for the loss of China, American agriculture risks losing its global position. Trump seems at a loss, but as a first step he has announced a support package for the hardest-hit farmers. The amount could range between $10 and $15 billion in its initial phase.
Trump’s plan is to channel some of the tariff revenues—revenues he claims are “sky-high”—back to the farmers. But the challenges are many. Using tariff revenues for subsidies normally requires congressional approval and could spark political strife. The shutdown of the federal administration does not make things easier. If passed, the subsidies may provide farmers with a welcome buffer, but they will not eliminate the need for new markets and reforms in agriculture.
Trump has announced that he will raise the soybean issue with Xi Jinping when they meet in South Korea at the end of October. But few believe he has much to gain. China may agree to buy small quantities, but not nearly as much as before. The Chinese leadership seems determined to expand trade with the “Global South” at the expense of the U.S.
Populous Brazil, with its growing economy, fits perfectly into this picture. Brazil is an important member of BRICS, an organization for countries seeking to free themselves from Western dominance. It also includes China, Russia, India, South Africa—and others. The differences between them are obvious, but their desire to stand up to the West binds them together.
For China, it is also about flexing muscles at a time when the U.S. appears increasingly vulnerable. Trump can therefore expect more humiliations from Xi in the future—unless he calms down and shows some common sense. China’s most powerful trade weapon is its near-monopoly on rare earth metals, which it has used on several earlier occasions. Without a stable supply of these metals, advanced industries in the U.S. and the West grind to a halt.
This means Trump has little room to bully China, as he has tried before. India, another rising giant, will be no easy opponent either. He would therefore do well to do his homework before traveling to Seoul on October 30, where the leaders of APEC (Asia-Pacific Cooperation) will gather for consultations.
