The US Administration is keeping wits about market participants across all industries by slapping tariffs, raising them, and thereafter removing them. Whereas it has become difficult to keep track of markets’ condition, as each day feels like another turn on Trump’s tariff rollercoaster, at the time of writing, all additional tariffs have been lifted — except for those targeting China which have been further increased. Nonetheless the world still has to endure a 10% baseline universal tariffs on imports, but China is taking the biggest hit after being hammered with 145% tariffs (at least by the time of writing) on all goods bound for the US. Meanwhile Beijing has answered with 125% levies. Indeed, when tariffs reach such lofty heights, their absolute level becomes unimportant since they are already far above that which would strangle trade. However, amid the ongoing tit-for-tat tariffs exchange, one thing remains consistent: it is an open -trade- war to China and China is willing to pick up the fight.
How all of this will affect trade flows between the two countries, and more widely dry bulk trade, is what we will address this week on the largest traded dry bulk commodity between the two nations: Soybeans. As conveyed in BRS Weekly Dry Bulk Newsletter 143 issued in November 2024, right after the results of US election, it’s been clear that China has been working on a long-term plan to secure grain supply in case of another trade dispute with the US. The damage to this specific trade had already taken root before the trade war. In addition, there has been a consistent increase in domestic production which slowly reduced the share of imports. Worried, the president of the American Soybean Association said, “After the first trade war, we lost nearly 10 per cent of market share in China that we never regained”. This market share loss has now risen above 10%.
According to AXSMarine data, Chinese grain and agriproduct imports from the US totalled 43 mln mt in 2016 – before the first Trump presidency, accounting for 38.5% of China’s global grain and agriproducts imports that same year. Since the end of Trump’s first term, the US share of Chinese imports averaged 21.4% across 2021-24. Last year, China imported 32.8 mln mt of grain and agriproducts from the US, accounting for barely 22% of its total agricultural imports. So far this year, the US market share has dropped to 16%. This plunge is especially significant since historically, US soybean shipments represented more than 80% of the agricultural products traded between China and the US. All told, the US’ market share in Chinese imports of the oilseed dropped from about 50% prior 2016 to about 25% last year.
Chinese buyers have begun operating and rapidly adapting as export and import data from the beginning of the year demonstrates. US shipments of grain and agriproducts to China plunged by 55% y-o-y in 1Q25, with soybean showing a 48% drop on the year for the same period. Some Chinese actors expressed that – in the case of continued escalation of tariffs – shipments from the US could hit zero by as soon as May. The significant decline in US imports during the peak season has resulted in China’s overall imports of soybeans slumping. According to the general Administration of Customs, China’s imports of the beans fell by almost 37% y-o-y in March to hit 3.5 mln mt, dragging down the first quarter to only 17 mln mt, 8% lower y-o-y. However, some of this decline can be attributed to a delayed harvest and port congestion in Brazil which pressured China’s March shipments lower.
China has found allies in South America, especially Brazil which has become the world’s largest producer and exporter of Soybeans. Therefore, renewed trade tensions between the US and China are expected to benefit Brazil. Indeed, as the US’ share of China’s soybean imports has dropped, simultaneously Brazilian supply of overall grain and agriproducts to China has soared from 39 mln mt in 2016 (35.4%) to 75.5 mln mt last year (50.3%). When examining soybeans, Brazil supplied less than 50% of China’s total imports prior 2016. However, today this share has soared to an overwhelming 75%.
More recently, the South American country shipped 19.6 mln mt of the oilseed to China during 1Q25, up 9% y-o-y and significantly above the16.7 mln mt quarterly average posted across 2021-24 (when the US was controlled by the Biden Administration). While April is early in the peak Brazilian exporting season, worsening US – China tensions appear to have accelerated the shift.
Bloomberg reports that Chinese crushers recently purchased at least 40 cargoes (over 2.4 mln mt) of Brazilian soybeans during the first half of last week starting 6 April. Whereas 40 cargoes is typically a full week average seen over the past years, Argus reported 70 cargoes being purchased for that full week, pushing market participants to expect record Chinese soybean imports from Brazil in 2Q25. Indeed, the Brazilian soybean harvest has ramped up so that 89% was reportedly completed as of 11 April (against 85% over the same period last year), making the 31.3 mln mt forecast to reach China during the second quarter to be achievable.
Assuming the purchase of 2.4 mln mt of beans has been made at the expense of the US, we calculate that this will already add 3 bln tonne-miles to the market since the distance between Brazil-China is longer than US-China by about 1,270 nautical miles (nm). To put this in further perspective, 3 bln nm represents 2% of the average tonne-mile generated by China’s global soybeans imports through the second quarter over the past 5 years. Not only overall Chinese imports during 2Q25 are expected to reach a record high which will bring a much-needed support to the Panamax segment as it will boost demand for tonnage, but it could further tighten supply by the expected longer distance, which usually brings support to freight rates.
