I planned to write about Nigeria’s agriculture this morning, but I suppose that can wait a day or so. This morning, the dominant theme in the news was President Trump’s inauguration and some executive orders he issued. There is also a lot of talk about tariffs, with President Trump threatening to issue 25% tariffs on goods from Mexico and Canada. There continues to be more talk about tariffs in China.
Therefore, revisiting some of my previous comments about his administration’s policy approach to agriculture may be helpful.
We are essentially back in the world of “tariffs” and “trade tension”, which escalated in 2018 when the US introduced import tariffs on Chinese products, and China retaliated with import tariffs on agricultural products.
When President Donald Trump imposed tariffs on China in 2018, US soybean, maize, and pork farmers were among the most negatively affected. China switched some orders to Brazil and Argentina, which became significant soybean suppliers.
President Trump indicated on his campaign trail that the US may impose up to 20% tariff on all imports and 60% on goods from China. Some of these may change in the coming days and months. Still, we don’t know how China would react to tariffs, regardless of what level. However, if China retaliates as it did the last time, the US soybean and maize farmers and pork producers would again be negatively affected.
This could be seen through disruptions in global grain and oilseed prices. The US is a significant producer, and when its grain market activity is disrupted, the impact tends to be felt globally. Moreover, US farmers could also start exploring other export markets in which they have not been as present to hedge against China’s risks.
Still, avoiding China on any global agricultural product will be hard. China is a dominant player in the export and import of agricultural products. In 2023, China was a leading agricultural importer, accounting for 11% of global agricultural imports. The US, Germany, Netherlands, the UK, France and Japan trailed China.
According to Trade Map data, China spends just over US$200 billion a year on agricultural product imports. The US is China’s second-largest agricultural supplier after Brazil. Other suppliers include Thailand, Australia, New Zealand, Indonesia, Canada, Vietnam, France, Russia, Argentina, Chile, Ukraine, the Netherlands, and Malaysia.
Indeed, if one looks at China’s agricultural imports, the top products include oilseeds, meat, grains, fruits and nuts, cotton, beverages and spirits, sugar, wool, and vegetables. The US has significant exposure to oilseeds and meat.
Similarly, China is a major exporter of agricultural products. In 2023, it was the fifth-largest agricultural exporter in the world. The leading countries ahead of China were the US, Brazil, the Netherlands, and Germany.
Implications for South Africa
This means that global agricultural trade has one additional risk factor to monitor closely. South African farmers must closely follow the formal trade policy developments in the US.
If President Trump follows through with promises of high import tariffs on China and China retaliates, there will be volatility in global oilseeds and grain prices. US farmers will likely feel more pressure than other regions. The South American farmers stand to benefit as an alternative source for China to procure soybeans.
South Africa is a small player in global grains and has undoubtedly not been a participant in the US grains and oilseed markets. The only risk is when the US farmers divert their products to South Africa’s traditional markets in the Far East, further recreating more competition and downward price pressures. This, too, is something we will have to monitor closely.
I remain optimistic that there will be minimal direct impact on South Africa. Whether the US imposes any other import tariffs that could directly affect the South African farming community remains to be seen.
Beyond the US, the trade fragmentation further solidifies my previously shared view that South Africa must work to diversify its agricultural export markets. In a fragmented world like today, an export-oriented sector should spend more time and resources on broadening export markets and diversifying the risk.
South Africa’s agriculture growth hinges on the country’s success in creating as many export markets as possible.
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