Brazil braces for more Chinese demand and higher food prices

Brazil, the world’s largest exporter of soy, cotton, beef and chicken meat, is expected to ship more to China as importers there seek tariff-free imports

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US President Donald Trump's trade war with China will give Brazilian agricultural exporters an opportunity to take an even bigger share of the Chinese market at the expense of American farmers, but it could also fuel already high food inflation in Brazil.

China this week retaliated swiftly to fresh US duties announced by Trump, imposing hikes of 10% and 15% in levies covering $21 billion worth of American agricultural goods, including meat and soybeans.

Brazil, the world's largest exporter of soy, cotton, beef and chicken meat, is expected to ship more to China as importers there seek tariff-free imports. During Trump's first term, the trade war he triggered with China led to US farmers losing a chunk of market share to Brazil, including for China's valuable soybean imports.

The US never regained that market share for soybeans. China continues to buy more of its agricultural imports from Brazil than it did before the first trade war, and that will likely accelerate again with the latest round of tariffs.

"Rising US-China tensions are likely to prompt China to source more grains and proteins from Brazil, potentially lowering commodity demand and in turn prices in the US, while increasing demand and prices in Brazil," Santander analysts said.