Soybeans imported from Brazil are unloaded at China's Nantong Port. Photo: Xu Congjun/Visual China Group via Getty Images

Although a partial agreement was announced last week, the U.S.–China trade war has already brought about changes in global supply chains that could have lasting effects on the American economy, particularly in the agricultural sector.

The big picture: The prolonged U.S.–China tariffs are exacerbating the harms to American farmers wrought by both other trade conflicts and the U.S. withdrawal from the Trans-Pacific Partnership. Foreign food producers are now likely to benefit at the expense of their U.S. counterparts, who have struggled to shift former Chinese exports to other markets.

What's happening: After China imposed a retaliatory 25% duty on many U.S. agricultural products in July 2018, those exports fell by 53% for the year. They dropped another 8% by the end of July 2019.

By the numbers: Australia, New Zealand, Brazil, Canada, the EU and other agricultural producers have all seen their exports to China grow while those of the U.S. have declined.

  • Brazil's share of China's $38 billion soy import market shot up to 76% in 2o18, while the U.S.' fell from 35% to 19%. Brazil has also taken up 15% of the $2 billion pork market, as the U.S. has dropped from 15% to 6%.
  • Ukraine has capitalized on the trade war to increase its share of China’s $790 million corn market from 61% to 81% through 2018. The U.S. share is down to 9%, from 17%.
  • Canada, Kazakhstan and Russia gained on China's $780 million in wheat imports at the expense of the U.S., whose market share fell from 38% to 14%.

Between the lines: With no end in sight for the current trade war, international competitors could secure enduring advantages.

  • The U.S. never made up the market share in beef exports it lost to Argentina, Brazil and Australia after a 2003 trade scuffle. Its share dropped from 69% in 2002 to 1% in 2018.
  • In the current conflict, China has turned to Brazil for most of its soybean imports, establishing new supplier relationships and incurring other transition costs that will keep Brazil's soybeans competitive even if U.S.–China tariffs are relaxed.

What to watch: In announcing last week's limited deal, the White House said China agreed to buy at least $40 billion of U.S. agricultural products, though few details have emerged.

  • Presidents Trump and Xi are set to meet in November on the margins of the Asia Pacific Economic Cooperation (APEC) meeting, where a final agreement on these purchases would likely require clearing other technical and political hurdles.

Decker Walker is a managing director and partner at Boston Consulting Group, where he leads the firm’s global agribusiness sector.

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