The humble crop that could be at centre of a China-US trade war

As tensions escalate between the US and China, one crop is emerging as the most powerful weapon in a potential trade war: the soybean.

China is the biggest buyer of American soybeans, picking up about a third of the entire US crop, which it uses largely to feed 400 million or so pigs. President Xi Jinping’s administration is studying the impact of restricting soybean imports in retaliation for US tariffs on washing machines and solar panels, people familiar with the situation told Bloomberg last week.

Any China soybean curbs would directly hit farmers in Midwestern US states that President Donald Trump needs to win re-election in 2020. Yet they would also pose a big risk for Xi. His nation is the world’s largest pork producer plus consumer and higher costs for pig farmers could increase prices of meat for his nation’s 1.3 billion citizens.

Food prices have long been a politically sensitive issue for China’s ruling Communist Party, which rose to power in 1949 in the wake of economic mismanagement that led to hyperinflation. A surge in the cost of everything from pork to electronics in the late 1980s also stoked dissatisfaction in the run-up to the Tiananmen Square protests.

“Using soybeans to retaliate against the US would be a worst-case scenario” for China, said Li Qiang, chief analyst with Shanghai JC Intelligence, a private grains consulting firm. “Pork is a staple meat for Chinese people.”