The Big Picture: US election: tariffs to the fore

  • While it would be wrong to assume a full repeat of the events of 2018-20, an extension and increase of tariffs was prominent among campaign promises from the newly elected US president.

  • In 2018 the first Trump administration introduced tariffs of 25% on imported steel and 10% on aluminium, while swift retaliatory tariffs of 25% from China on US soybeans helped lower the country’s exports—at a time when swine flu outbreaks in China had suppressed demand.

  • While not attempting to second guess the next administration’s trade policies, we look at previous Trump-era tariffs and note October’s seasonal high for (largely Panamax) US soybean shipments to China will arrive before the change in presidents.

US tariffs: the example of 2018

The first round of import tariffs (25% on steel and 10% on aluminium) in March 2018, eventually ruled illegal by the World Trade Organisation (WTO) in 2022, had a profound effect on US steel imports, which dropped from 35.3m tonnes in 2017 to 20.1m tonnes by 2020 (see chart below).

Although Section 232 tariffs (on grounds of national security) were mostly retained by the Biden administration, US steel imports are now running at an annual rate of around 27.5m tonnes (with Canada’s share at 6-7m tonnes).

US steel imports from China slipped from 1.1m tonnes in 2017 to 545,000 tonnes by 2020 (and annualising to 0.7m tonnes this year—2.5% of US imports).

Accompanying falls into the US between 2017 and 2020 were seen from Japan (-1.0m tonnes to 0.7m tonnes), South Korea (-1.6m tonnes to 1.8m tonnes) and Turkey (-1.5m tonnes to 0.5m tonnes), while steel imports from Vietnam slumped -0.7m tonnes from 2018 to just 0.3m tonnes by 2020. The largest rebound has been from Vietnam, now running at an annual rate of 1.3m tonnes.

Unusually, Australia was exempted from US tariffs on steel in 2018. Imports from Australia were marginally higher in 2020 than in 2017 (albeit at a relatively small 285,000 tonnes).

As indicated in our 360 Degrees of 29 October, moves towards steel trade protectionism are certainly not limited to the US and China, with the EU and others considering steps against a range of exporters.

As outlined in the second chart below, it can be argued that a greater impact on dry bulk imports came from retaliatory measures from China, in particular, its 20% tariff on imported US soybeans. China’s soybean imports not only retreated in 2018, but buyers showed a clear preference for beans from Brazil. This was not solely the consequence of US trade protectionism, however, as it coincided with bird flu outbreaks in China.

US soybean exports: October peak

October has been the peak month for US soybean exports in each of the previous four years. With East Asia the dominant destination, it has represented a strong month for Panamax grain loading from the US Gulf and West Coast. Vessel tracking data from AXS showed a 4.6m tonne monthly gain in October for Panamax (70-99.9k dwt) US grain shipments to 7.1m tonnes, the strongest month since 2022.

For comparison, US grain shipments on geared bulkers saw only a slight monthly gain. On this trade, geared bulkers serve a range of destinations in the Americas, North Africa and East Asia.

Significantly, last month’s International Grains Council (IGC) forecast of a 10% leap to an all-time high for US soybean output in 2024/25 also noted an “increasing ability of Brazilian suppliers to export sizeable amounts […] during the September-January period”—in other words, outside the main Brazilian export season and during the US export peak.

With a nod towards the US presidential election, US-based consultants AgResource Company claimed in a newswire interview that buyers in China were avoiding the US for January delivery onwards. This followed the highest week for US soybean export inspections in a year in mid-October.

The IGC also forecast a 4m tonne gain in US soybean exports in 2024/25 (Oct-Sep). Even if achieved, this would fall short of both 2021/22 and 2022/23.

Brazil’s soybean availability next year will receive a boost from a record production, according to the IGC and other forecasters.

Soyabeans were the focus of China’s retaliatory tariffs in 2018, but since then the country has raised imports of corn and wheat substantially. That said, shipments of US corn and wheat to China have been reducing in volume through the course of the year, judging by shipment and official trade data.