China’s strategic counteractions to the Trump administration’s trade wars, including pivoting to BRICS nations and developing advanced technology, highlight the global repercussions of weaponised trade and the urgent need for adaptive policies in an evolving economic landscape, writes Oscar van Heerden.
They say crises create clarity, and because of chief disruptor, US President Donald Trump, China has certainly moved to ever better clarity with regard to their future plans and trade relations with the US.
When Trump slapped China with tariffs to the tune of 145%, he thought that the Chinese would be spooked. Instead, Xi Jinping and his team in Beijing simply hit back where it hurts the most - agriculture.
In retaliation China cancelled with immediate effect all its orders of soya beans, and when I say immediate, I mean ships en route from the US to China had to turn around and return to various US ports. The soya bean sector lost billions of dollars in revenue almost immediately. US farmers are in a tailspin.
Interestingly, China ordered the short fall of soya beans from Brazil, who was ever ready to provide the required amounts. What this means is that China and Brazil planned for this type of scenario sometime back already. It’s as if they knew that the Trump administration was going to pull a stunt like this. Other products that also formed part of this were pork and sorghum.
Trade war impact
China has been a premium grade customer of US agricultural products for decades now, and all this seems to have come unraveled because of this trade war.
China’s pivot towards BRICS countries like Brazil sends a powerful message to the US agriculture sector, that even if the tariffs are lifted tomorrow there is no guarantee that China will return to the US market, because trust has been broken.
This is what happens when you attempt to weaponise trade and certain commodities. And may I add, it is not only the growers (farmers) negatively affected, but also equipment suppliers, feed stores and repair shops in rural America, the heartland of Trump’s support.
Short term bailout packages from the federal government are nothing short of band-aid on a festering wound. It is simply not enough because everyone knows that trade turbulence sparks political uproar.
Throwing money at the problem without resolving the core issues, which is a reactionary trade policy, just won’t do it for the sector.
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Next was the “chip war”. The US administration ordered US companies that produced sophisticated chips to halt all sales of such chips to the Chinese market, which, by the way, resulted in the loss of billions in revenue for these companies because China is such a huge market. Low and behold, the Chinese company Huawei Technologies just unveiled their 910C super chip which not only rivals other US and EU manufacturers, but surpass it in many regards. This, simply put, is the final death nail in the coffin of the chip war which the US thought was going to retard China’s technological progress.
This geopolitical standoff is not going well for the Trump administration. US banks are also being told not to conclude certain deals with the Chinese government, and as a result, China responded by offloading $1 7 trillion of USA debt.
This sent reverberations throughout the international market. These are all calculated moves to show Trump that China means business.
China’s belt and road initiative, where investments are being made all over the world, is indeed for the benefit of China first and foremost and secondly to the recipient country. Currently, with the noise Trump is making with regard to the Panama Canal, China is in serious talks with the Sandinista government in Nicaragua about investing billions in a new canal that runs through that country.
Coming to a ballot box near you
This trade war is not only playing out in boardrooms across America, but will soon also play out at the ballot boxes. There are increasingly loud calls for multilateralism and market diversification with cooperative trade policies. But will the Trump administration listen?
Russia exports large amounts of oil and gas to the Chinese market, while Brazil provides the shortfall of agricultural products. So where does it leave South Africa?
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Does SA have any plans in place to also become a major provider of China? Technologically, SA is literally nowhere in the global market. As for SA’s agricultural sector, can the country step up? Could SA perhaps invest in enhanced cold storage, logistics technology or blockchain tracking? Will SA be able to adapt, upgrade and future-proof existing systems? Is SA exploring new markets and innovating farm practices?
If SA is to survive in this ever increasingly, turbulent trade world, it needs to gear up and get ready with smart trade and industrial policies.
- Oscar van Heerden is a senior research fellow for African diplomacy and leadership at the University of Johannesburg.
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