China’s move to impose tariffs of 25% on US soybean imports is unlikely to impact the dry cargo market, a leading analyst has predicted.

“We do not believe that the tariff will meaningfully impact the drybulk shipping markets,” said AXIA Capital Markets’ Clinton Webb.

“Producing only around 12.9mt of soybeans domestically, China is the world’s largest importer with volumes of 95.1mt or 60% of global imports.

“Although Brazil and Argentina are likely to increase their soybean sales to China as a result of increasing prices spurred by tariffs, American soybeans exports cannot be fully substituted.”

Webb says that in the event that all of Brazil’s soy exports were to go to China, there would still be a deficit that the rest of the world would be unable to fill in the near-to-medium term.

“Even in such an unlikely outcome, the results would likely be neutral to the dry bulk freight markets,” he said.

“Voyage times from the USGC or Brazil to China are both ~40 days according to our calculations, rendering ton-mileage demand largely unchanged.”

Webb added that while escalating US-China tariffs were expected, it was surprising that China elected to include oilseed.

The product is the US’ largest agricultural export to the country, totaling 32.9mt or 34% market share, and was worth around $14bn last year.

“Taking a cue from the European Union, the measure is a targeted policy aimed at President Trump’s electoral base,” suggests Webb.

“Eight of the ten largest US soybean producing states voted for Trump in the 2016 election.

“However, soy is predominantly used as animal feed. And, a 25% tariff would likely increase Chinese food prices. Hence, it is surprising that China would risk price increases in its food supply.”