A question we received this week was in regards to the new US administration, and the liberal use of tariffs, and how it might open opportunities for Australian commodities. China is the focus, as Canada and Mexico have received reprieves, so we’ll look at US/China trade on some grain commodities Australia is interested in.
The 10% tariffs the US has imposed on China won’t affect grain markets in that direction. With its massive population, China doesn’t export any grain or meats. The US imports all sorts of manufactured goods from China, like Australia, but the US market is more than ten times larger than Australia.
How commodity markets will be affected by retaliatory tariffs from China remains the big question in markets currently. China has yet to place tariffs on agricultural goods, focusing on oil, agricultural machinery, and gas.
Figure 1 shows Chinese imports of grain and oilseed commodities for the 10 months to October last year. It was somewhat surprising to see just how Brazilian soybean imports dwarf all other grains and oilseeds. From January to October in 2024 China imported nearly 69mmt of soybeans from Brazil, and 15.7mmt from the US.
To put some perspective on the amount of soybeans imported by China, it is roughly three years of Australian total wheat production. If China were to put tariffs on US soybeans it may shift some oilseed demand to Australian canola, given the scale, it would be unlikely to shift prices far.
In Figure 2 we have taken soybeans out to give a better idea of grains imported by China. Wheat and barley are the main grains we would be concerned about. Our main competitor in barley is Canada, with US exports of barley to China negligible.
Australia competes with the US for market share in wheat. Australia’s significant wheat exports represented approximately 10% of last year’s crop. US wheat exports to China represented 3% of the US crop
US corn exports to China are also relatively small. US corn competes with Australian wheat and barley in stockfeed markets, so any tariffs imposed might theoretically direct more demand toward Australia.
What does it mean?
China needs grain and oilseed imports to feed its livestock and people. The problem with imposing tariffs on food is it increases prices for consumers can cause civil unrest. As such China are targeting other US products, which it can source elsewhere. We don’t expect any bumps in grain prices thanks to the tariff dispute on China, the Canadian canola situation is where the impacts are being seen.
Key Points
- The tariff dispute between the US and China will be ongoing but hasn’t extended to ag commodities yet.
- China’s largest import volume from the US is in soybeans.
- China has avoided placing tariffs on food and feed commodities thus far.
Click on figure to expand
Click on figure to expand
Data sources: USDA, Nutrien, Mecardo
