Macroscope | US-China trade war may be a boon to the euro and Brazilian real

Never let a serious crisis go to waste. Rahm Emanuel, former US president Barack Obama’s first chief of staff, made that assertion back in 2008, but from a market perspective, those words could equally apply today amid deteriorating trade relations between China and the United States. 

The bottom line is that China-US trade tensions will offer markets trading opportunities, and as these two economic giants square off over trade issues, markets will seek to identify potential winners and losers. That’s what markets do. But where might their gaze fall? 

Soybeans is a good place to begin, following China’s decision to put tariffs on US agricultural products, as part of Beijing’s response to an initial set of levies on Chinese goods imposed by the US. 

China, with the world’s biggest livestock industry to provide for, purchases about 60 per cent of globally traded soybeans, as reported on Friday. Brazil supplied half of those imports in 2017, with the US providing around a third. 

It’s perhaps no wonder then that, when China announced its move, the market pushed up the price for Brazilian soy, rationalising that Brazil would be the prime beneficiary of any US loss of soybean market share in China.