China Deploys Food as High-Impact, Low-Cost Weapon In Trade War

The most recent reprisal in the trade war between the two largest economies in the world, Chinese tariffs on a wide range of American agricultural exports, went into force on March 10.

The government’s achievement in increasing agricultural self-sufficiency and the effect of a slowing economy on demand are highlighted by China’s readiness to use food as a countermeasure against the United States, which has historically been one of its largest suppliers.

Following early action centered on energy and essential metals, the agricultural tariffs range from 10% to 15% on various goods, including grains, proteins, cotton, and fresh vegetables. All American timber purchases and imports of soybeans from three US companies have also been suspended. Beijing also placed retaliatory tariffs on various Canadian agricultural products on March 8, which will take effect on March 20.

Providing enough food for the 1.4 billion people still tops the policy agenda. While China is still a major export destination for the Midwest farm belt’s primarily Republican states, Beijing’s attempts to reorganize supply chains during the trade battle during the first Trump administration have reduced Washington’s negotiating power.

The abundance of food is a bright light on the Chinese economy’s dismal epidemic recovery. Addressing the effects of domestic excess has become increasingly urgent. Corn imports have fallen, while local wheat prices are at five-year lows. The most recent statistics, released on March 9, indicated that a sharp drop in food prices was driving deflation in consumer prices.

In response, the government has made an effort to safeguard its farmers. Soybean shipments have been delayed, and traders have been urged to restrict their foreign acquisitions of barley and sorghum.

Beijing’s eagerness for trade probes and levies in recent months, which have targeted everything from seafood, meat, and dairy to rapeseed and pulses, indicates that policymakers are not too concerned about erecting obstacles to imports, especially when it comes to high-end goods that household budget cuts have hardest hit.

These initiatives are supported by record grain production and a resolve to exploit this time of abundance to increase stockpiles. The government increased its output goal for the year and its stockpile budget at its annual parliamentary assembly, which ends this week.

An ongoing concern about the susceptibility of livestock herds to imported soy supply is reflected in the promotion of more technological solutions, such as cutting back on soybean meal in animal feeds. With a 2024 value of around US$13 billion (S$17.31 billion), soybeans are America’s leading agricultural export to China. In recent years, there have been significant attempts to reduce China’s reliance on Brazilian and other less hostile suppliers.

Due to the seasonality of global production, South American countries will continue to receive the majority of Chinese imports until at least the fourth quarter, meaning that the 10% duty on US beans is unlikely to change much in the upcoming months.

Naturally, the government will want to boost the economy, and getting consumers to part with their cash will be significant. Food costs might increase, and attitudes toward imports could shift if the government were to stimulate the economy successfully. Calculations would also be impacted by climate change-induced extreme weather on crops. Meanwhile, Beijing uses one of the more effective, less expensive tools in its trade armory to target American agricultural products.