European Union countries are set to approve a set of retaliatory levies on the United States on Wednesday in response to President Donald Trump’s sweeping tariffs on America’s trade partners.
The expected tit-for-tat comes as China also retaliated against Trump’s tariffs this week. The unfolding tariff spat has destabilised global markets and seen stocks fall across the board.
Trump’s latest tariffs put a 20 percent levy on all EU goods. The tariff rate is 104 percent for Chinese goods.
The EU’s actions will target US aluminium and steel products, as well as American agricultural imports – key among them being soybeans.
One of America’s biggest imports globally, could soy prove to be Washington’s Achilles heel that trading partners, including the EU and China, use to hit back effectively?
Here’s what to know about what a soybean trade war could mean – and why it could be a big deal for the US, economically and politically:
Why is soy so important for the US?
Soy, in the form of whole beans, animal feed, or oil, is a cornerstone of the US agricultural industry and represents one of America’s biggest agricultural revenue earners.
It accounts for about 0.6 percent of GDP. The US has more than 500,000 soybean producers, according to the Department of Agriculture’s Census of Agriculture. That includes at least 223,000 full-time jobs supported by the soybean industry, according to a 2023 report for the National Oilseed Processors Association and the United Soybean Board.
The industry is worth $124bn in the US – that’s more than the entire economy of Kenya or Bulgaria.
Although local demand for soy in the US is growing, exports form the basis of the crop’s success. The US is presently the second-largest exporter of soybeans globally, selling more than half its yield to about 80 countries.
Who does the US export soybeans to?
Soybeans contributed more than $27bn of US annual exports in 2023, according to data from the Observatory of Economic Complexity (OEC), an open-source data visualisation platform.
That’s more than any other agricultural export.
China, which imports $15bn of US soybeans, is by far the most important market, followed by the EU – and especially Germany, Spain and the Netherlands, which buy about $2bn worth of the oilseed.
Yet, both China and the EU are now at the heart of a global pushback against Trump’s tariffs. They were both on the “worst offender” list of countries hit by a barrage of tariff hikes announced by Trump last week. The list included countries that Washington claimed were unfairly taxing US goods in their countries.
Trump slapped the EU with a 20 percent surcharge, apart from 25 percent levies on steel and aluminum, which form a key part of the bloc’s exports to the US.
China, in total, now faces a 104 percent tariff on all its US exports as of Wednesday.
Will the EU and China retaliate with tariffs on soy?
Both entities appear to be targeting US soy, a soft spot for Washington, considering the importance of their markets to American farmers.
The EU has promised to target US goods worth up to €26 billion ($28bn) in retaliatory tariffs.
While those tariffs are expected to be enforced in phases, one of the products on the EU’s list is soy.
The bloc will vote on a surcharge of up to 25 percent on a list of targeted goods on Wednesday, with no opposition expected. A first set of tariffs will be enforced from April 15.
Meanwhile, US soy exports to China, its biggest market, are also facing a battering. China had earlier honed in on US food products, slapping a 15 percent duty on commodities like chicken, wheat and corn, while imposing a 10 percent levy on soybeans, meat and other farm exports.
On Saturday, China placed an additional 34 percent on all US goods, bringing the surcharge on soy, in particular, to 44 percent. A further 50 percent hike on all US goods will take effect on Thursday, Beijing has announced.
That means American soybeans will now face 94 percent tariffs in China.
Experts say China can afford to gamble with soy because it has increasingly turned to Brazil for its soy imports since 2017 when the first trade war began during Trump’s first administration.
US soy exports to China have fallen in the time since, while Brazil now holds more than half of the market share. In 2024, Brazil exported $36.6bn worth of soy to China while the United States exported $12.1bn worth of soy.
How are US soy farmers reacting?
https://x.com/ASA_Soybeans/status/1909613301564112985
American soy farmers have urged Trump to remove tariffs on China, the EU, and other top markets like Mexico. Most have emphasised China’s importance to US farmers.
“China bought 52 percent of our (soybean) exports in 2024,” the American Soybean Association’s chief economist Scott Gerlt told the AFP news agency. Given the size of its purchases, China cannot easily be replaced, he added.
Some farmers say many won’t be able to hold out for too long if the trade spat continues, as their produce would become too expensive to be competitive on the global market.
“If this trade war lasts beyond the fall, you’re going to see farmers go out of business,” soybean farmer David Walton told US news channel ABC.
What could be the political implications?
The war on soy, and indeed, the tit-for-tat tariff row, could have deep political implications.
So far, Trump has issued the policies as executive decrees, denying Congress the right to weigh in on the matter.
But Republican Congressman Don Bacon, Republican Senator Chuck Grassley and Democrat Senator Maria Cantwell are preparing to introduce legislation that would force Trump to notify Congress of any new tariffs, with its enforcement subject to the House’s approval, according to reporting by US publications Politico and Axios. The chances of the bill passing through are slim, however, since Republicans dominate the House and Senate.
Still, whatever happens in Congress, the political consequences might be felt beyond Capitol Hill, too.
Nearly all of the American soybean exports to the EU come from Louisiana alone, the home state of Republican House Speaker Mike Johnson. The politician has nonetheless spoken in favour of the tariff hikes.
In a press statement last week, Johnson said Americans should “trust the president’s instinct on the economy”.
“It may be rocky in the beginning, but I think in the end it will make sense for all Americans, it will help all Americans,” he said.
