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Ag caught in crossfire of escalating U.S.-China trade war

The chief commodities economist with StoneX Group says U.S. agriculture continues to get caught in the crossfires of a national security dispute between two geopolitical powers.

Arlan Suderman tells Brownfield “I’ve been warning for years we need to find other markets to replace China, because this day will eventually come. The day has come.”

A significant escalation in the U.S. and China trade war happened over the last four days, mostly over rare earth minerals and reciprocal port fees, and the grain markets have responded.

Suderman says U.S. agriculture has become so dependent on China, it will continue to take a major effort, and more than four years, to replace the market.

“But China was moving away from us. They’ve been moving away from the United States for the past 15 years, if not longer. It’s been investing in Brazilian infrastructure to make this transition, helping to finance Brazil becoming its primary supplier.”

Suderman says the U.S. is trying to expand domestic demand while exploring new markets, but that takes time.

“I think there were hopes we could keep our exports going with China a few more years to allow that domestic demand to develop. And that’s what’s causing the pain, it’s happening faster than the ag industry is able to transition.”

While U.S. soybean exports to China are a major issue for agriculture, Suderman says rare-earth minerals and magnets are an even bigger issue between the two countries when it comes to national security.

“Rare-earth minerals and magnets are an essential component not only for today’s electronic and high-tech economy, but for protecting ourselves militarily and for building the development of the defense weapons we use to protect ourselves. That’s the top priority in the negotiations right now.”

He says China is trying to be the top military economy in the world. Over the weekend, President Trump tried to calm the markets and China did the same thing, but Suderman says no policies were changed.

The U.S. and China are still expected to meet at the end of the month in South Korea.