China has stopped all purchases of U.S. soybeans as the trade dispute between the two countries continues.
What's the background?
In March 2018, President Donald Trump announced steep tariffs on all imports of steel and aluminum to the United States, citing national security concerns. China retaliated to this by announcing tariffs of its own on U.S. exports. This triggered an escalating series of tariffs and retaliatory tariffs announced by both countries.
After a temporary truce in December, trade negotiations seem to have again broken down.
On Thursday, Bloomberg News reported that China was putting all future purchases of soybeans from the United States on hold. Existing orders have reportedly not been cancelled.
Before the tariffs, China was the largest buyer of U.S. soybeans, purchasing $12.25 billion worth of the product in 2017. Since then, this number has continued to decrease. At the start of the 2018-19 marketing year, U.S. exports of soybeans to China had dropped by 97 percent.
Of course, soybeans are just one part of a larger picture. According to data from the U.S. Census Bureau, U.S. exports to China overall in the first three months of 2019 were down by $17.1 billion compared to the same time period in 2018.
After the trade war cease-fire in December, China had bought roughly 13 million metric tons of soybeans from the United States.
With the loss of the Chinese market, U.S. soybean producers have been forced to sell their beans at discounted prices to Iran. Although the U.S. government has imposed tough sanctions on Iranian banking, energy, and shipping sectors, these do not apply to agricultural commodities.
The U.S. Department of Agriculture paid out $7.7 billion in aid compensate farmers for both the loss of their export market and the increased prices of farming equipment made with steel and aluminum.