A wave of Chinese tariffs on U.S. goods is set to come into effect on July 6 as trade tensions between the two countries continue to intensify.
Those tariffs — which China has said will be levied against goods worth $34 billion — will in part target several major U.S. commodities, including soybeans, electric vehicles, seafood and pork. Another list subject to tariffs at a later date includes crude oil.
On the surface, Beijing's decision to target commodities may seem a strategically sound move: By definition, commodities are interchangeable, so the Chinese marketplace should be able to swap out its U.S. imports for those from another country. But that might not work out quite so well for China, experts said.
"The picture is a little more nuanced," said Caroline Bain, research consultancy Capital Economic's chief commodities economist.
Take soybeans, for example.
U.S. exports constitute 40 percent of all soybeans traded internationally. China, meanwhile, imports about 60 percent of all soybeans in the global marketplace. In other words, the U.S. has been an important supplier for China, but Beijing's July 6 tariffs will include a 25 percent levy on American soybeans.
Brazil already supplies about half of China's soybean imports, and Chinese buyers are purchasing more and earlier from the South American country this year, Bain said.
And, in a sign that China is planning to ramp up soybean purchases from other countries to work around U.S. supplies, Beijing said on Tuesday that it would remove import tariffs on animal feed ingredients including soybeans from five Asian neighbors, Reuters reported, citing China’s Ministry of Finance.
Unsurprisingly, prices of benchmark Chicago soybean futures have slumped about 6 percent since news of the latest round of trade tensions broke.
While much has been said about the slump in soybean prices, the decline also tracked a general fall in commodity prices due to fears about a global fallout from an all-out trade war between Washington and Beijing, Bain said in a recent note.