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New List of China's Surcharge Tax against the U.S. Benefits Brazil

04/05/2018 - 10h22



One day after the U.S. announced a long list of Chinese products to be taxed, on Wednesday, April 4, China disclosed its retaliation list including products such as soybean, meat, corn, orange juice and other American products that it intends to surtax - which represents an escalating trade war between the two economic powers.

The measure could benefit Brazil and other Latin American exporters, such as Argentina and Paraguay. These are countries whose agricultural products with high competitiveness are on the Chinese list of retaliation and could substitute American imports.

Today Brazil is the biggest exporter of soybean to China. The U.S. is the second biggest and sells nearly one third of its production to China. Brazilian soybean, however, would be a natural substitute of the American products, much in the same way as Brazilian meat could substitute that from the U.S.

In addition to these products, corn, sorghum, wheat, cotton and tobacco could also be targeted by the new tariffs.

Analysts and investors believe that, although China still depends on U.S. imports to supply its local demand, even with the new tariffs, the measure is likely "to favor Latin American producers in detriment of products made in American," said Goldman Sachs bank in a message to its clients.

However, there are no reasons to commemorate yet: the lists announced this week contain products currently under negotiation. Tariffs have not come into force yet and China has not even announced when they will be applied.

Even if the surcharges are confirmed, the transfer of the market to Brazil and other Latin American countries is not automatic, stresses André Soares, an associate researcher at Atlantic Council. "Our competitive advanatges are limited," says Soares.

Translated by THOMAS MUELLO

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