Soy, A Chinese "Glass Jaw"?

Yesterday the Trump administration announced another $200 billion in tariffs on Chinese goods to go with the $34 billion in tariffs already in place. Tariffs announced yesterday won't go into effect until after a public comment period scheduled for the end of August, giving China or the U.S. ample time to blink. The concern of the financial markets is there is no indication that either side has any intention of relenting.

It is important to remember that what the Trump administration is shooting for is to have China scrap its industrial policy, "Made in China 2025," and that's not going to happen. China is not a small nation willing to compromise its sovereignty to get along with a super power upon which it relies for its security. The United States is a rival. To relinquish is to capitulate.

There has been more reporting of late about China's voracious appetite for soy, something The New York Times considers a Chinese "glass jaw." But what I took away from Raymond Zhong's excellent "China’s Taste for Soybeans Is a Weak Spot in the Trade War With Trump" is that things are not as bad as they seem for China.

For one, Chinese agriculture is not as wedded to the pesticide-drenched industrial GMO model as the United States:

As an incentive, the provincial government offered generous subsidies to farmers both for growing soybeans and for switching their fields to soy from corn.

Word of the new subsidies spread quickly on the social media app WeChat. And soon, many farmers were returning corn seeds and fertilizer they had already bought and planting soy instead.

With all the government support, Guo Qiang, a 35-year-old farmer in the village of Dawusili, said that he would love to grow only soybeans, and no corn, on his family’s 50 acres. But his farm cooperative requires that members rotate their crops to keep the soil healthy.

[snip] 

To reduce its dependence on American soy, Beijing could also try to squeeze more beans out of each acre at home. But farmers in Heilongjiang acknowledge they are a long way from being as productive as farmers in the United States, where agriculture is more mechanized and genetic modification is embraced.

China allows imports of genetically engineered crops, but Heilongjiang forbids farmers to grow them. Many people here harbor deep doubts about such products’ safety, both for people and for the land.

“I wouldn’t grow them even if the government allowed it,” said Gai Yongfeng, the head of the Jiaxing farm cooperative in Dawusili. “They’re bad for the soil. After you’ve grown them somewhere, nothing else will grow there. That’s what everyone says.”

An ethic of sustainability appears to be stronger in China than in the United States, which is a long-term plus. But with its food security in doubt China will take this opportunity to diversify its suppliers:

American farmers could still take a sizable hit in the long run if China’s tariffs prompt Brazil and other suppliers to expand their soy acreage, or if China bankrolls cultivation outside its borders. Many people from Heilongjiang are already growing soybeans across the Amur River in the Russian Far East, where land is cheap and plentiful.

In 1969, fighting erupted between Soviet and Chinese troops along this border. But these days, relations are good and trade is brisk. In the border city of Heihe (pronounced “HEY-huh”), many street signs are written in both Chinese and Russian. In Xiaowusili (“SHYEEOW-oo-suh-lee”), the parks have trash cans painted to look like giant matryoshka nesting dolls.

China’s hunger for soybeans could deepen ties further. In a recent interview with the Chinese state news agency Xinhua, the head of a Russian soybean association said that the group was looking to team up with Chinese companies, and had set up an office in Heilongjiang’s provincial capital, Harbin, to attract investment.

Zhong could have mentioned but didn't the sizable investment the Chinese have made in arable land in Africa.

For a long time the Chinese knew this train was coming down the track. The only thing Trump has done is opened up the throttle on the locomotive. Instead of thinking in terms of 20 years from now, we're thinking of right here, right now.

There's no going back. Take a look around. We're living in a new age.