Industry anticipates intensified U.S.-China trade tensions, but implications for Brazil remain unclear
01/20/2025
Four years after concluding his first term as president of the United States, Donald Trump has returned to office. Since his victory in November last year, Brazil’s agribusiness representatives have been evaluating the potential consequences of a renewed trade war between the U.S. and China.
In 2018, Trump imposed tariffs ranging from 10% to 50% on hundreds of Chinese imports, including agricultural and other products. Beijing retaliated by restricting imports of U.S. goods. These measures ultimately benefited certain segments of Brazilian agribusiness, such as the soybean sector, which gained market share in China due to the tariffs imposed on U.S. soybeans.
Experts consulted by Valor indicate that the direction of U.S. trade policy under Mr. Trump’s second term is still uncertain. “First, we need to see if Trump follows through on the 100 measures promised for inauguration day. Then, we need to analyze and understand those announcements. Without concrete details, it’s difficult to assess the direct impact on agribusiness,” said Marcello Brito, professor and technical coordinator at the Dom Cabral Agroenvironmental Foundation.
Despite the lack of clarity regarding Mr. Trump’s trade policies, Mr. Brito believes there will be no immediate disruption to the agricultural trade flow between Brazil and the U.S. In 2024, the U.S. was Brazil’s second-largest importer of agricultural products, with purchases rising 23% year-on-year to $12.1 billion, according to Brazil’s Ministry of Agriculture. Green coffee sales led the way, surging 67.6% to $765 million.
“It’s not feasible for the U.S. to suddenly impose tariffs on Brazilian coffee without having the capacity to replace what they might stop importing. Any tariff increases will be applied cautiously, targeting products with minimal impact on domestic demand,” Mr. Brito assessed.
The professor noted that a potential new trade war between the U.S. and China may have a limited effect on Brazil’s agricultural exports. “Last time, Brazilian agribusiness benefited because a large gap opened in the Chinese market,” Mr. Brito said. “But I don’t think that will happen again. There’s no longer room for a significant increase in export volumes.”
While the specifics of any new trade dispute remain unknown, global market conditions have shifted since 2018. For this reason, Mr. Brito expects limited repercussions from a more aggressive U.S. trade policy targeting Brazilian exports.
“In this second term, Trump faces a geopolitically different world. Beyond the lack of unoccupied market space, geopolitical disturbances like wars have already been factored into prices, and trade has adjusted accordingly,” he added.
Chris Trant, head of agriculture at U.S.-based consultancy HedgePoint Global Markets, suggested that Brazil will continue to dominate China’s grain supply. In 2023, China imported 105 million tonnes of soybeans, 75% of which came from Brazil.
“Trump’s proposed tariffs may create volatility in the grain market, but U.S. farmers are less dependent on China thanks to strong domestic demand. Meanwhile, China has reduced its reliance on U.S. soybeans by focusing on Brazil. A critical issue will be whether Trump reduces support for biofuel and renewable energy production,” Mr. Trant said.
The potential introduction of new policies favoring the oil industry, as seen during Mr. Trump’s first term, could impact the grain market, especially corn, noted Tiago Medeiros, Brazil director at U.K.-based trading firm Czarnikow. “Trump will aim for U.S. energy self-sufficiency, which means increasing not just oil exploration but also domestic ethanol production, particularly in California,” Mr. Medeiros said. In the U.S., corn is the primary feedstock for ethanol production.
*By Paulo Santos e Camila Souza Ramos — Campina Grande (PB), São Paulo
Source: Valor International