It is likely not that China's total soybean imports will break the record in July, but that China is preparing for an impending trade war between China and the United States!
The outcome of the U.S. election in November this year will have a profound impact on the future of the world, and if former U.S. President Donald Trump makes a comeback, then he is likely to launch a new round of challenges to China in the economic and trade fields. According to foreign media reports, some industry insiders said that China's soybean imports in July this year may hit a record high, such as Singapore's traders and Chinese analysts have estimated that Chinese buyers have ordered about 12 million ~ 13 million tons of soybeans arriving in July, much higher than the 9.73 million tons in July last year, and in the past, the highest record of China's soybean imports in a single month was 12.02 million tons, which shows that the situation in July this year is quite abnormal.
As for why Chinese buyers are accelerating soybean imports, there are only two reasons.
On the one hand, soybean prices fell in July, such as Chicago soybean futures, which fell to their lowest level since 2020. Because soybeans in South America are coming to market, production is record high, and the market expects that the supply of soybeans is very abundant, so the price of soybeans has plummeted, and it is normal for China to increase its buying when soybean prices have fallen to historic lows.
But on the other hand, as mentioned earlier, the more important reason for China's increase in soybean imports is for risk aversion. The reason is simple, Trump has long threatened to impose high tariffs on China after taking office, which means that the trade war between China and the United States may be renewed, in order to reduce the impact of the Sino-US trade war at that time, and avoid some losses caused by tariff increases, China has increased its soybean reserves in advance.
Of course, because China is very dependent on imports, even if China increases its soybean reserves in the short term, it still does not change the long-term reality that China needs to continue to buy soybeans abroad. As we all know, although China can achieve self-sufficiency in the food sector, it cannot be self-sufficient in domestic vegetable oil and soybean meal for livestock alone. If soybean trade between China and the United States is greatly hindered, then the domestic livestock industry may be affected considerably, and the price of meat eaten by Chinese may rise. So, if Trump makes a comeback, will the United States use soybeans to choke China's neck and cause the price of meat on the Chinese' dinner table to rise? Now, we don't need to worry too much about this, and stockpiling soybeans is just one of China's possible responses, and the more important response strategy is to ensure that the soybean supply is diversified. We can learn from the last trade war.
Since 2018, the Trump administration has imposed tariffs on hundreds of billions of dollars of Chinese goods, while China has retaliated with tariffs on agricultural products, including U.S. soybeans. In the same year, China's imports of U.S. soybeans fell from 32.9 million tons in 2017 to 16.6 million tons in 2018, but this did not have much impact on the lives of Chinese, for the simple reason that China bought back more soybeans from other suppliers. Before 2018, the United States was China's leading supplier of soybeans, and since then, Brazil has been the number one supplier of soybeans to China. In the first five months of this year, China imported more than 24 million tons of soybeans from Brazil, up 23% year-on-year, according to data released by Chinese customs. During the same period, 10.85 million tonnes of soybeans were imported from the United States, down 34% year-on-year. It can be seen that although the United States is still an important source of soybean supply for China, China has greatly reduced its dependence on the United States by strengthening cooperation with other trading partners, at least in the field of soybeans, even if the United States turns against China again, China's soybean supply will not be too much trouble.
However, although China has reduced its dependence on the United States in the soybean sector by diversifying its supply, we must admit that the economic and trade ties between China and the United States are still inextricably linked, and if Trump restarts the trade war with China, the impact will be multifaceted, and soybean supply is only a small issue. On the one hand, it should try to advise the US not to undermine economic and trade cooperation between the two countries and not to resume a trade war that harms others and is not beneficial to itself. On the other hand, in the face of increasingly risky economic and trade cooperation with the United States, China has no choice but to explore more economic and trade ties with other countries to reduce the impact of a possible Sino-US trade war. Whether we like it or not, the situation today is different from that of more than a decade ago, and the rapid growth of the global economy in the context of the era of globalization is now difficult to replicate, replaced by a global economic downturn and the gradual rise of trade protectionism in various countries. In the face of such a situation, China should also be prepared to deal with strong winds and waves.