Why does China insist on US agricultural products when it can receive it from Brazil?

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Last Monday, China announced the suspension of its purchase of US agricultural products in a further unfolding of the trade war between the two countries, which is once again seen as a good opportunity for Brazilian producers.

Since the beginning of this trade war between the two major powers of today, considerations have emerged about potential spaces to be filled by Brazil with its commodities. This time, it’s no different. But for international trade expert José Luiz Pimenta Junior, a professor at the Álvares Penteado Trade School Foundation (FECAP), while there is a glimpse of this possibility in the short term, there are, at the same time, there are reasons for Brazil to worry about the escalating economic tensions between Washington and Beijing.

The academic is adamant that, in the long run, protectionism is not good for anyone. He recalls that because of these protectionist measures adopted on both sides, the world economy and world trade are expected to grow less this year.

“Countries can take advantage of this in the short term, they can finally sell more products in the short term,” he commented on the chance of Brazil and other countries to replace US and China in certain exports. “In the long run, protectionism is not good for anyone. Trade warfare, the phrase as it was coined, can create tensions that can do harm to everyone in the long run.”

According to the professor of FECAP, although not all measures that make up the protectionist rhetoric of the US and China have been put into practice, the existence of tensions provoked by this rhetoric is already enough to stir the markets, which in turn passes on these uncertainties for the population, in a possible “ripple effect”.

“Let’s see how this evolves in the coming years. Let’s see how effectively policies behave in the coming years.”

For José Augusto de Castro, president of the Brazilian Foreign Trade Association (AEB), the country has to gain from the recent unfolding of the trade war between Beijing and Washington, especially if it knows to remain neutral in the dispute. However, this gain, not necessarily, according to him, will have an impact on the real value of exports.

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“We can benefit in terms of quantity, but not necessarily price. Clearly, with this trade war, the tendency is for Brazil to increase its export quantity, but that does not mean that prices will stay the same,” he said, also arguing that there may be a fall in the prices of some products that Brazil exports.

Commenting on the specific case of China’s suspension of its purchase of US agricultural products, Castro says he believes that Brazil is emerging as a first option in this case.

“When China stops buying from the United States automatically, it will buy from Brazil. Something it could buy, for example, from Argentina, in terms of soy,” said the expert, explaining that for the US there will be no one more definite market for this product.

According to Castro, Beijing’s recent decision to move its exchange rate, causing widespread declines in the financial markets, was not in question. The move, according to him, indicates to the world that China will become more commercially aggressive in exporting its products, even if there is an increase in the cost of production due to imported raw material from abroad, as Chinese producers have a large state support.

“China, at this point, has not checkmate, not quite. But it has moved a piece that simply caused the world to rethink the next move.”

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