China seeks trade edge by shunning US soy in first since 1990s

[BEIJING] For the first time since at least the 1990s, China has not bought any US soybeans at the start of the export season, a sign that Beijing is once again using agriculture as leverage in its trade fight with Washington.

As the world’s top soybean buyer, China wields enormous influence over global markets. Now it’s reviving a familiar tactic of holding back on US purchases, deployed during the first trade war under US President Donald Trump, as the two countries navigate a fragile truce.

Data from the US Department of Agriculture show China had not booked a single cargo as at Sep 11, almost two weeks into the new marketing season, the first time in records going back to 1999. Last year, the US made up a fifth of China’s soybean imports, worth more than US$12 billion, and accounting for over half of the total US soy export value.

Beijing, with healthy stockpiles in hand, is signalling it has the patience and capacity to wait, and that it’s willing to use commodities as a bargaining chip in broader trade talks. President Xi Jinping is set to speak with Trump on Friday (Sep 19), as the two countries spar over restrictions on semiconductors and rare earths. In the run-up, China has ratcheted up pressure by announcing that a preliminary probe found Nvidia in violation of anti-monopoly laws.

“China’s approach on soybeans is similar to its approach on rare earths, in that it reflects years of careful game-planning since the last trade war,” said Even Pay, an agriculture analyst at Trivium China, a policy consultancy in Beijing.

“Buyers are responding not just to the high tariffs that remain on US beans, but also to the extremely high degree of uncertainty regarding the short-term outlook for those tariffs, and the very clear political signals that Beijing does not want purchasing to happen without officials giving the go-ahead,” she said.

That strategy appears to be paying off. US farmers, flush with bumper harvests, are coping with prices near the lowest levels in years. The soy growers, who constitute a key voting bloc for Trump, have warned of a “trade and financial precipice,” urging the administration to cut a deal with China that removes tariffs. US soybeans going into China currently face duties of more than 20 per cent.

Across the Pacific, the mood is calmer. Chinese crushers, pig farmers and feed producers, bruised by the first trade war, have secured months of supply from Brazil. Some have doubled their inventories, while the state’s vast reserves provide an additional buffer. Soybeans are primarily crushed in China to produce soymeal for its massive pig feed industry and soyoil for cooking.

Chinese importers have bought enough cargoes to cover their needs for the rest of this year, according to sources familiar with the matter, who asked not to be identified discussing commercial matters. That pushes any urgency to scoop up US supplies to at least the first quarter of 2026, they said.

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Chinese buyers typically rely on US soybeans between October and February, before the South American harvest arrives. Importers tend to book weeks ahead to lock in cheaper prices, and by now would have already purchased a few million tonnes. But with trade tensions lingering, they’re steering clear of American beans, wary of retaliatory tariffs and geopolitical risks.

The strategy extends beyond soy. China has also curtailed purchases of US corn, wheat and sorghum for the new season, even as it continues to source these grains from Brazil, Canada and Australia. While overall grain imports are down as the economy slows, the move also fits Beijing’s bigger push to reduce reliance on the US and diversify where it gets its supplies.

With American farmers feeling the squeeze, agriculture is expected to be high on the agenda in Trump’s ongoing trade talks with China, according to Andy Rothman, a former US diplomat and now chief executive officer of Sinology, a firm that advises institutional investors and companies on navigating US-China tensions.

Farmers had already warned Trump of a looming crisis, while the president has urged China to quadruple soybean orders from the US. Rothman said while Trump may push for progress on a broader trade deal, any real agreement is unlikely over the phone, especially with both sides preparing for a face-to-face meeting later this year.

There are small efforts by China to ease some tensions ahead of the talks. Beijing has resumed purchases of US oil after a six-month hiatus. It’s also dropping an antitrust probe into the dominance of Google’s Android, the Financial Times reported on Thursday, citing sources briefed on the move.

Agriculture, especially soybeans, will remain central to any deal, Rothman said. Instead of the “impossible” targets set in the original Phase One agreement, both sides are expected to settle on more realistic commitments.

Supply risks

China’s strategy of avoiding US soy is not without risk. Brazilian soybean prices have climbed sharply since the start of the year, and any disruption to the South American harvest could tighten supply. If the country’s crops falter, China might need to tap into its strategic reserves sooner than anticipated.

But with supplies already more than ample, the prospect of an imminent trade deal might actually worry some in China. If Beijing were to suddenly purchase US beans, a supply glut might drive down domestic soymeal prices, disrupting the careful stockpiling and hedging strategies producers have built over months.

In northern China, one purchasing manager said that he had only locked in supplies through next month, citing high inventories. Another manager at a major crusher warned that a sudden influx of US beans could cause meal prices to crash. Both asked not to be identified as they are not authorised to speak publicly.

If not for the tariffs, the US remains one of the most efficient, low-cost suppliers of soybeans, and China is paying a premium to go without them, according to Trivium’s Pay. The longer it holds out, the higher that cost and the greater the pain of skipping American supplies.

In the first trade war, even as China slapped retaliatory tariffs on American soybeans, it granted some exemptions and allowed businesses to bring in limited amounts of farm goods.

“If a deal is struck, there will definitely be some level of demand for US soybeans from Chinese buyers,” Pay said. “The issue is the trade war – not a total lack of demand.” BLOOMBERG