BIRMINGHAM – When a photographer recently captured U.S. Treasury Secretary Scott Bessent reading a text message at the United Nations General Assembly, the image inadvertently revealed the magnitude of the deepening agricultural crisis in the United States.
“Yesterday, we helped Argentina,” said the message, apparently sent by Agriculture Secretary Brooke Rollins. “In return, the Argentines are removing their export tariffs on grains, reducing their prices and selling a large amount of soybeans to China, at a time when we normally [EUA] “We would be selling to China.”
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Forty-eight hours after Argentina’s decision to eliminate export taxes on grain products, Chinese buyers purchased about 1.3 million tons of Argentine soybeans – just as American farmers began their harvest season without any orders from China. The increase in Argentine exports caused soybean prices to fall, giving China even more of an advantage over the United States.
This is not just a story about trade disputes or commodity flows. It’s a case study in how U.S. President Donald Trump’s tariff-first trade policies fundamentally misunderstand 21st century supply chain economics and how temporary shocks can trigger permanent structural changes.
Although the conventional narrative presents soy as a bargaining chip between the US and China, it is not a final consumer good. Soy is an intermediate input within a tightly integrated agro-industrial supply chain. Crushing facilities process soybeans to produce animal feed and oil, which in turn support livestock production and food security. All it takes is to interrupt one node and the entire system can reorganize itself – and never return to its previous form.
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China learned this lesson the hard way in 2004, when global traders manipulated soybean prices – raising them from $540 to more than $750 per ton – and then announced bumper harvests that sent prices plummeting to $500, locking Chinese processors into high-priced contracts. Academic studies estimate that around 3,000 soybean processors have gone bankrupt, while foreign traders have gained control of 70% to 85% of China’s crushing capacity.
China didn’t just lose money; lost control over a critical link in its food security supply chain. In response, it built vast strategic reserves through its state grain company, Sinograin, protected its remaining state-owned crushing plants, and began investing heavily in South America’s agricultural infrastructure.
Trump’s 2018 tariffs accelerated these diversification efforts. Chinese investment had already financed the ports, railways and logistics networks that now efficiently transport South American soybeans to Asian markets, ensuring that when these tariffs disrupted trade between the US and China, the necessary infrastructure was already in place.
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As a result, what might previously have taken two decades to unfold unfolded in just seven years. Between 2011 and 2018, about 60% of all U.S. soybean exports went to China. But, in 2024, Brazil’s share of Chinese soybean imports rose to 71%, compared to just 2% in the 1990s.
The current trade war, which completed the reorganization that began in 2018, reflects the delayed response inherent in global supply chains. When Brazilian and Argentine farmers expanded production, this capacity did not disappear with the suspension of tariffs. Chinese mills have established long-lasting relationships with South American suppliers, while ports and logistics networks have been optimized for Brazil-China routes. Global soybean prices, previously focused on North American crops, now follow the South American agricultural calendar.
The economic logic behind this shift is simple: concentrated buyers like China can diversify sources of supply much more easily than dispersed sellers like American farmers can find equivalent markets. China imports 100 million to 105 million tons of soybeans per year, surpassing all other importers.
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Since China is responsible for 60% of the global soybean trade, US farmers have no way of replicating that demand elsewhere. While China once faced excessive dependence on a single supplier, US farmers are now paying the price of relying on a single buyer. No combination of smaller markets can compensate for the loss of your largest customer, who invested in viable alternatives.
All of this highlights the incoherence of the United States’ current trade stance. The country provided Argentina with around US$20 billion in financial aid to prevent it from moving even closer to China’s orbit; Argentina responded by eliminating export taxes, instantly making its soybeans more competitive before selling it to China.
Meanwhile, American farmers, who received about $28 billion in subsidies between 2018 and 2019, have seen their market share evaporate and are now bracing for another financial bailout. As a spokesman for the Illinois Soybean Association recently put it: “What we really want is to have good relationships with our trading partners. We want markets. We don’t want bailouts.” Yet the US continues to subsidize its farmers and finance its competitors.
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This dynamic exposes a deeper flaw in the way the U.S. approaches globally interconnected markets. Tariffs may protect industries on final goods with high switching costs, but they are disastrous for intermediate goods in flexible supply chains where buyers can easily replace links. Evidently, US trade policy does not recognize this essential distinction.
The similarities with UK trade policy after Brexit are striking. Both countries’ strategies reflect grandiose rhetoric about sovereignty and influence, ignoring the complexity of adapting supply chains to disruptions. By treating trade as bilateral, when it is inherently multilateral, they overestimate its indispensability and underestimate adjustment costs.
My own research on post-Brexit trade reveals that disruptions intensify rather than diminish over time – 2023 saw trade declines more pronounced than in previous years – indicating deeper structural changes rather than a temporary adjustment. The UK has disengaged from EU value chains for consumer goods, but remains dependent on the EU for intermediate and capital goods.
Just like American farmers who lost access to the Chinese market, the party initiating the disruption faces asymmetric vulnerability: It is easier for buyers with options (the EU and China) to reorganize their sources of supply than for sellers (the UK and US) to find equivalent alternative markets.
The soybean saga offers a broader lesson. In modern commerce, control over supply chain nodes is more important than control over raw materials. China lost control of its crushing capacity in 2004 and spent two decades ensuring it would never be so vulnerable again.
The US is now losing access to its biggest export market because the government has not understood that once supply chains reorganize, they don’t reverse just because tariffs change.
When Bessent read that text message, the result was already clear. He was, in effect, reading the obituary of a business relationship that years of misguided policies had systematically dismantled. The question now is not whether it can be rebuilt, but whether American policymakers understand why it is not possible.
Translation by Fabrício Calado Moreira
* Jun Du is Professor of Economics at Aston University, specializing in international trade, productivity and global value chains.
Copyright: Project Syndicate, 2025.
