When Meros first visited China in July to discuss the brewing trade war and its potential impact on US agricultural exports, Chinese ag traders were optimistic.

This may blow over in a few months, they assured us. But by September and October when we returned and discussed dairy, grains and soybeans, the mood was decidedly more resigned.

As of this first week in December 2018, where are we?

The trade situation changes weekly and certainly impacts different US agricultural products differently, but there were several common themes among our talks with Chinese ag trade experts.

  • There is both optimism and pessimism about the future of US agriculture trade: When talking to a range of people, from Beijing policy makers to Shanghai importers, it is the policymakers and academics who are far more pessimistic than traders and industry players.  Policymakers see the conflict through the lens of government-to-government conflict and this tension is likely to continue, even as one tariff is replaced by some other barrier.
  • Chinese traders are looking for other suppliers of agricultural and food products and there is no guarantee they will return to US supply even after the trade war abates.  While some Chinese buyers and their US suppliers initially tried to share the tariff burden or freeze prices at pre-tariff levels in the hope that the tariffs would soon be dropped, this is increasingly unsustainable as the war drags on.
  • The chance to diversify suppliers and develop new trade relationships is considered a good opportunity for China.  Both policy makers or traders saw a good chance for China to focus on both its own domestic agriculture industries and supply chain infrastructures. It is also a chance to deepen relationships with new suppliers around the world and support them in strengthening logistics, an area that the US would normally have an advantage.
  • Trade is flexible. If direct routes to the China market are stopped, products tend to find a way to be rerouted, processed or exchanged through third-countries. Reports of US soybeans heading to Argentina for storage until the trade war abates or products routed through Vietnam are already initial indications of global trade doing what it always does – readjusting.
  • It is a chance for Chinese companies to expand into new and growing markets, including Vietnam or Indonesia, where US agricultural commodities and ingredients are more easily available. “See you in Vietnam!” joked one Chinese feed trader, as she described their new operations in Hanoi where they expect to be able to continue their US feed grain imports.

The interest by China central government to strengthen global grain, oil seed and food supply options and build up trade logistics is clear from the effort put into its One Belt One Road initiative, an ambitious policy of trade development from China through central Asia as far as Europe, using a variety of investments and incentives.

While Chinese traders and importers scrambled to adjust their suppliers for many products, there was no sense of impending doom. Overwhelmingly, it was disappointment at how unpredictable agricultural trade with the US has become. Whether this confidence is well placed or overly optimistic will become clearer in the next months.


Meros Consulting is a Tokyo-based strategic business advisory. We work with companies and governments globally to advising on trade dynamics and support business development in the food and agriculture industries.