How the US-China trade war could affect Brazil – News

$ 34 billion of Chinese products came into effect this Friday (6), marking the start of a trade war between the world's two largest economies. The 25% rate applied by the United States provoked immediate retaliation from China.

The Asian country imposed an identical surtax on 545 US products, which also total $ 34 billion. Some of the major US export products, such as soy, pork, seafood and electric vehicles, have been affected by the measure.

Another battery of Chinese products will reach another $ 16 billion. this time, exports of crude oil, natural gas and refined oil were affected. In the current context of integrated economies in a multilateral trading system, price changes, reductions or increases in production, closures or relocations of factories, or the pressure to redirect products towards the end of the year. Other destinations have direct repercussions on the economic partners of China and the United States

Relationship with Brazil

Although Brazil has a trade surplus with China In the country's economy, foreign trade reproduces a historic dynamic: Brazil exports basic products and imports manufactured goods.

The Chinese buy products such as iron ore, sugar, cellulose, beef and chicken. But soy is the main Brazilian commodity sold to China, accounting for 43% of last year's exports. According to the Ministry of Industry, Trade and Services (MDIC), Brazilian soybean exports to the Chinese market accounted for more than US $ 20 billion in 2017.

The United States imports mainly semi-manufactured aircraft. steel and aluminum and crude oil from Brazil. According to MDIC data, Brazilian exports to the United States increased by US $ 26 billion last year. "The disadvantage is that these tensions can slow down global growth, which could hurt emerging markets, both in terms of Penelope Prime, director of the China Research Center at Georgia State University (USA). )

Announced Conflict

Since the presidential campaign, Donald Trump promised to put "America first" and claimed that China was the enemy to fight to send back Jobs to Americans.

During a visit to Beijing last year, Trump insisted that trade rules needed to be rebalanced.Trade between the two countries.Chinese President Xi Jinping, a supporter of globalization, badured that China would open up to foreign companies

What the United States says

Trump accuses China of adopting unfair practices, such as theft of the property American companies. The US trade deficit with the country reached 375 billion dollars last year. China views US protectionist measures as an "attack" that it must fight to protect itself and baderts that the Americans have started "the biggest trade war in history".

In the last two months, the two countries have entered into commercial conflict. The United States has begun to implement measures against China, in addition to the resources of the World Trade Organization (WTO). They announced import tariffs against Chinese products and investment restrictions, which the Chinese government fought back.

The White House wants to reduce its trade deficit with China by $ 100 billion and announced in March aluminum, an action that also affected Brazilian exporters. In response, Beijing has evaluated more than 100 US products, such as pork, fruit and nuts, steel tubes for the oil and ethanol industry. The US then released a list of 1,300 Chinese products targeted for tariffs of up to 25%, items that represent $ 50 billion worth of imports from China.

According to Louis Chan, director of research at the Hong Kong Trade Development Council (HKTDC) in China, the so-called "trade war" is not just about the two countries. "What the United States does is unilateral against Chinese and other allies, such as the European Union, Mexico, Argentina and Brazil, countries that were formerly trading partners and d & # 39; investment, "he said. and other economies are exporting products in competition with the United States, the Chinese tariffs on these products are expected to increase exports from Brazil and these countries, such as soybeans, "said Prime, of the University of State of Georgia

Steel

The trade war will be cyclical, says Cui Daiyuan, professor of economics at the University of Shanghai, China. "Brazil could also be affected by US protectionism, although it wins in the short term by turning away from the supply of commodities."

Trump's surtax on steel has directly affected Brazilian steelmakers. Brazil is the second largest source of steel for the United States, domestic sales account for one-third of Brazil's exports and are now subject to a new tariff of 25%.

Even though China and the United States conclude a truce, Chan points out that the Chinese government has worked very well with Brazil and other emerging economies. For the Chinese economist, a change in the global supply chain is underway, creating winners and losers.

"Even without the trade war, there will be changes in the relations between emerging economies.

Chan believes that the dispute with Washington will serve to bring emerging markets closer, such as South-South cooperation. "If you discover that your suppliers are unreliable, as their policies may change overnight, then you are likely to search for more reliable partners."

But the conflict can be short-lived. Gustavo Oliveira, a geographer and political scientist at Swarthmore College in Pennsylvania, believes the two countries need to agree on these tariff issues in a matter of months. "What is happening is a realignment, where you have less US exports to China and more exports from Brazil and other countries to China."

For Marcos de Paiva Vieira, professor of economics at the University of Technology Canton, Brazil can exploit the situation positively. "It is time to take advantage of the dispute, in all its aspects, to seek more business and investment: being pragmatic, Brazil must remain equidistant, opening to investigations of both parties. commercial, mergers and acquisitions and foreign investment. "

The expert points out that the profit from the increase in the sale of Brazilian soybeans, to offset the decline in the US supply, contributes to a favorable result of the trade balance and

Despite the initial benefit, William Jackson, emerging market economist at Capital Economics, believes that Brazil can be reached by other means. "First, a more general deterioration in the scenario caused by trade concerns could weaken real and rising inflation." Second, Brazil would be vulnerable if the US began to impose general duties on specific products, such as aircraft. trade could slow down the Chinese economy, which could lower commodity prices as Brazil's exports decline. "

For the United Nations Conference on Trade and Development (UNCTAD), the grbad is destroyed and everyone loses.A study of the agency made with 124 countries shows that in the worst case, that of a trade war involving all the countries of the world, the average tariffs applied to Brazilian exports could go from 5% currently to 32%

The Brazilian Minister of Agriculture and one of the largest soybean producers in Brazil, Blairo Maggi, told Reuters in Paris that he fears that higher foreign demand for domestic soybeans will drive up prices and undermine Brazil's competitiveness According to Maggi, the country is gaining in the short term, but in the medium and long term, a strong export demand could pose a problem, since Brazil Soy is the main agricultural product that the United States sends to China and represents almost 10% of exports from ys. With the boycott of Beijing by the American soybean, the Brazilian agro-industry has achieved a high profit on the past harvest.

Ten years ago, 38% of soybeans imported into the Chinese market came from the United States and 34% from Brazil. Gustavo Oliveira explains that China can not count

According to the data of the General Administration of Customs of China, 57% of the soybean that supplies the Asian country comes from national cultures . with Brazilian soy to replace the American, since Brazil directs much of the national production (43 million tons) to feed the domestic market. Brazilian exports suffer from political instability, as evidenced by the recent national truckers' strike.

In addition, China imports nearly two-thirds of the world's soybean production. "Brazil and the United States each export more than a third, and all other countries have added less than a third, which basically means that all soy must come from the rest of the world and from all over the world. The other countries. Brazil will serve the Chinese market. All other importers, other than China, should import exclusively from the United States. This situation is unrealistic due to various logistical, market and contract issues. "[19659002 Model Development

For Oliveira, of Swarthmore College, think about the impact of the trade war on a narrow badysis of agribusiness, c & # 39; is to badume that everything that promotes the sector is good for the country. "A big crisis for the agri-food sector," he criticized

. "A big crisis for the agri-food sector is not so simple." This conversation took place in the framework of which the agribusiness, the iron and steel industry and the Brazilian mining.The Brazilian can be a good thing for thousands of landless families, millions of small farmers and for many from other sectors of Brazilian society who have a different vision of agribusiness development ", considers Oliveira in an interview with BBC News Brazil. 19659002] The researcher warns that the friction between China and the United States shows how Brazil is a major exporter of agricultural products and minerals. "He is very exposed to the advances and setbacks of the negotiations between Beijing and Washington, where the Brazilian companies or state do not even have any weight.Brazil is hostage to a model neocolonial. "

On the fact that Brazil's relationship with China boils down to exporting low value products and buying industrialized products from China, Chan of Hong Kong argues that Chinese companies are already producing computers, televisions and machines in Brazil as a new deployment of Sino-Brazilian cooperation. "They take advantage of the Manaus Free Trade Zone to produce and sell not only in the Brazilian market, but also in South America," he says.

According to Vieira, also deputy director of the Society of Emerging Economies of Guangzhou, China, we must think about a better quality business relationship. "It is imperative that Brazil seize the moment of this conflict that sets the new global hegemony to attract more technology from China, especially financial solutions (fintech)." As Chinese practices are now light years away from any other country of digital payments, the use of blockchain and even crypto-coins, it would be very healthy for Brazil to absorb these advances more quickly. "

BBC Brasil – All rights reserved – Reproduction without written permission of the BBC