By Ella Cao, Naveen Thukral and Lewis Jackson
BEIJING/SINGAPORE -Grains traders globally are closely watching talks between the United States and China for signs of progress on agricultural tariffs, a key test for American farmers to regain a foothold in their top export market.
Senior Chinese trade negotiator Li Chenggang is visiting Washington this week for talks with U.S. officials.
WHY DOES AGRICULTURE MATTER FOR TIES?
Farm products are the biggest U.S. export to China and a commitment by Beijing to increase purchases is likely to feature in a broad trade deal. President Donald Trump has already urged it to quadruple soybean purchases.
But looming over the talks is the memory that parts of the 2020 “Phase 1” deal, struck during Trump’s first term, went unfulfilled, in particular a commitment by Beijing to buy an additional $200 billion worth of U.S. goods over 2020 and 2021.
China is the top market for U.S. farmers, taking $29.25 billion of their goods last year, and buying more is a powerful lever for Beijing to help close the huge trade deficit Trump frequently uses to justify tariffs.
With China the world’s largest soybean importer and the United States the second-largest grower, U.S. sales of the oilseed were worth $12.8 billion and China bought roughly half of all U.S. exports.
Much of that trade is now frozen, thanks to Chinese tariffs on U.S. soybeans and other farm products.
A deal could see China ramp up purchases beyond last year’s levels. Agricultural imports have fallen by more than a quarter since peaking at just over $40 billion in 2022, roughly equal to the annual commitment in the Phase 1 deal.
WHAT COULD HOLD UP A DEAL?
However, reaching or exceeding those levels will require U.S. exporters to displace competitors, especially in Latin America, where China increasingly buys agricultural products.
The U.S. share of China’s agricultural imports slid to 12% in 2024 from 20% in 2016, while that of Brazil rose to 22% from 14%, Chinese customs data shows.
A major shift back towards U.S. supply would reverse a years-long campaign to diversify away from Washington that began after Trump’s first trade war.
Part of that campaign is a push to cut reliance on overall food imports, which would complicate prospects for any ramp-up in buying.
In April, China unveiled a plan to trim by 10% soymeal inclusion in animal feed by 2030 – a move that could slash annual soybean imports by about 10 million tons, or nearly half of U.S. soybean exports to China last year.
WHAT ROLE WILL SOYBEANS HAVE?
The size of the soybean trade is likely to make it a big part of any Chinese commitment to buy more U.S. agricultural products. But the window is rapidly closing for purchases of this year’s U.S. crop.
China normally imports U.S. soybeans between September and January, but it has not pre-booked any cargoes yet – a delay traders warn risks U.S. exporters missing out on billions if Chinese crushers keep opting for South American cargoes instead.
Benchmark Chicago soybeans are trading close to their lowest since 2020, weighed down by a lack of Chinese buying and expectations of a bumper U.S. harvest.
U.S. soybean farmers wrote to Trump this month pleading for a deal with Beijing and warning of dire economic consequences if China continues to shun American crops.
(Reporting by Ella Cao, Lewis Jackson and Naveen Thukral; Editing by Clarence Fernandez)
