Argentina could win us$ 10 B with the trade war between China and USA

The trade “war” between the United States and China could give Argentina extra revenues of up to 10 billion dollars in 2019, thanks to better local export prices for grains, according to a report by Quantum Finanzas. This could mean an extra income of up to 2.5% of GDP.

The report added that recent estimates from the United States Department of Agriculture indicated that for the 2018/19 season it is possible to expect a harvest of 118 million tons of soy, corn and wheat. The soybean and corn crop would return to the levels of the 2016/17 campaign, of 55 and 41 million tons, respectively.

The firm highlighted that the expected increase in the amounts is added to the effect that the US-China trade conflict is generating on the price of some of the agricultural products of local exports, particularly that of soybeans. “China’s imposition of a 25% tariff on exports of certain products from the US generates a detour, which could now seek to source more from the other major soy producers: Brazil and Argentina,” the report said.

The details of how it was calculated:

    • At the beginning of 2018, prior to the beginning of the commercial conflict, the differential between the price of local soybeans (before the payment of withholdings) and that of Chicago was practically zero. From that moment it grows to levels of 50-60 dollars per ton, in favor of the local price.
    • The prices that China pays for soybeans acquired in one or the other case tend to equalize, although differences in tariff regimes indicate that the producer in Argentina receives less than the US. (245 and 301 dollars per ton, respectively).
    • The biggest difference is explained by taxes on foreign trade (Argentina 30% and China 25%).
      The United States, Brazil and Argentina are the main producers of soybeans in the world, with export surpluses, while China is the main importer (65% of the total imported world-wide).
    • The tariff rate of 25% worked as a pressure factor on the prices of the other producers with export surpluses.If the conflict continues -at least in this segment of trade- Argentina could have a very good 2018/19 campaign product of recovery of volumes and prices higher than anticipated prior to the start of the conflict.
    • It would mean additional income in the order of 9/10 billion (2.5% of GDP), contributing to the growth and reduction of the current account deficit.

By Aldo Leporati published 20 Nov