Brad W. Setser | Council on Foreign Relations


The United States’ number one or two export to China (depending a bit on the market price, and a bit on how many airplanes China is buying).

The leading, and most politically significant, casualty of the trade war.

And something that I have followed for a long time. My mother grew up on a ‘beans and corn (and horses and sheep) farm. The massive seasonal impact of the U.S. harvest on total U.S. exports to China has always jumped out at me—both because of Midwestern pride (we impact the global data!) and because its persistence always seemed to me to be a reflection of a much bigger story (the weakness of U.S. non-agricultural exports generally, but especially to China).

And well, now the entire world finds soybeans interesting.

I thought various arbitrage conditions associated with trade in a true commodity would limit the impact of China’s tariff on U.S. prices. I got that wrong. The initial impact of the tariff was quite clearly a fall in U.S. prices relative to Brazilian prices. China, which accounts for something like two-thirds of world ‘bean import demand, was so big that it had market power (its tariffs lowered U.S. prices more than it raised Chinese prices).

That gap between Brazilian and American beans has now closed (the U.S. government’s agricultural trade data is really good).

Soybean Export Prices




[Read the original piece here.]