A China-US trade war: a threat to tropical forests and the Cerrado?

Image courtesy of Andre Vasconcelos

Alex Morrice

As the tit-for-tat threats over trade sanctions between the US and China continue, one loser if this war of words turns into a full blown trade war could be tropical forests and other important habitats, particularly in Latin America. One tariff threatened by China is particularly eye-catching; a 25% tariff on American soy, as part of a package of sanctions aimed squarely at Trump-supporting parts of the US.

China currently imports over 22.8 million tonnes of soy from the US, totaling 34.7% of all the soy it imports. Chinese Vice Finance Minister Zhu Guangyao has explicitly recognised that should the 25% tariff be introduced China is likely to shift away from the US and towards Latin America to meet its growing demand for soybeans. The effect of such a shift could be devastating, with Brazil overtaking the US as the dominant soy exporter, deforestation sharply increasing across Latin America, and possible increases in prices for international markets.

China is the world’s largest importer of soy, and its consumption is growing. Imports increased from around 2 million tonnes in 1986 to approximately 65 million by 2013. Brazil provided 49.7% of China’s soy imports in 2013, or 32.7m tonnes, with imports from the US accounting for 34.7% (22.8m tonnes) and Argentina 10.4% (6.8m tonnes), meaning these three countries combined accounted for 95% of total soy imports. While the volume of Brazilian soy entering China is rapidly growing, US and Argentinian imports have stagnated in recent years.

Chinese soy imports (millions of tonnes) by country and by year. Data from the FAO.

If China imposes the threatened 25% tariff on soy from the US, this will dramatically curtail the economic viability of one of its most important suppliers. This means the focus will likely turn to nations in Latin America to fill the gap. Brazil is well positioned to become the most important soy-exporting country in the world, if other countries do not shift their sourcing elsewhere. Given Brazil’s success in providing the non-GM soy required by the EU, this seems unlikely. Therefore, there is a strong possibility of increased land clearance to critical biomes like the Cerrado, and frontiers of deforestation such as MATOPIBA to meet this growing demand if tariffs are imposed on the US.

However, Brazil is unlikely to be able to meet China’s entire demand on its own. Other soy-exporting countries such as Argentina and Paraguay are also likely to want to capitalise on this opportunity. This can only increase pressure on their tropical forests. As well as a possible major impact on land clearance rates, a Chinese tariff on US soy may increase global soy prices, by increasing demand for Latin American soy which is unlikely to be met immediately by increases in supply, in turn driving up the price of meat.

This series of potential sanctions provides an example of the potential influence of macroeconomic forces and global commodity supply chains on tropical forests. If these tariffs are implemented, the price may not only be paid in dollars but in increased carbon emissions, lost biodiversity, and disrupted water security. That will be a high price for the planet to pay.

With thanks to Chris West, Stuart Singleton-White, Thomas Kastner, Toby Gardner and Helen Burley.

Like what you read? Give Global Canopy a round of applause.

From a quick cheer to a standing ovation, clap to show how much you enjoyed this story.