Insight Focus
China is trying to make as many friends as it can for global trade. Meanwhile, the US strategy seems to be diverging as President Trump appeals to the Supreme Court to save his tariffs. In the midst of all this, trade routes continue to take new shapes and farmers and consumers alike face cost and production challenges.
President Trump touched down in the UK this week with issues on the agenda to include investment , technology and the wars in Gaza and Ukraine.
This comes after the director-general of the WTO Ngozi Okonjo-Iweala told Reuters that global trade conducted under the WTO has slid to 72% from about 80% prior to the US president’s trade war. The WTO’s Most Favoured Nation principle requires that member treat others equally when it comes to trade. Okonjo-Iweala stressed that the world is experiencing “the largest disruption to global trade rules, unprecedented in the past 80 years.”
Fed Rate Cut Expected
All eyes were on the Federal Reserve Bank this week as it made the first interest cut of the year. The majority of economists had predicted the cut mainly due to gloomy July jobs data, which showed that US openings fell more steeply than expected, indicating a tightening job market.
Source: US BLS
But the economy is still showing mixed signals as the CPI for August came in higher than expected, indicating higher spending.
Source: US BLS
But this rise in spending could at least partially be explained by higher earners. According to an analysis by the Boston Fed, “overall spending adjusted for inflation—has been propelled by the highest-income consumers.” It added that low-income consumers now have much more credit card debt than prior to the pandemic in 2019. And according to container tracking company Vizion, while global container bookings are up 5.1% year over year to 1.847 million TEU for the week of August 4, US import bookings have declined on the year for the fifth consecutive week.
China Tightens Links with Brazil
One of the biggest suppliers missing out due to the fragmentation of the China-US supply chain is US soybean farmers. According to reports, Chinese importers are booking huge quantities of South American products – even during the prime US marketing season – leaving North American farmers out in the cold.
Reuters has reported that Chinese importers have already booked 7.4 million tonnes of soybeans for October shipment – mainly coming from South American countries such as Brazil and Argentina. This covers 95% of the Asian giant’s demand for the month. Importers are yet to book any US shipments for the year ending August 2026, according to the report.
According to Chinese customs data, China significantly increased its soybean purchases from Brazil between May and July 2025, buying minimal amounts from the US.
Source: GACC
China has also approved Brazilian sorghum for import, according to the Brazilian Ministry of Agriculture. The crop was previously restricted in China due to a lack of phytosanitary certifications, but these approvals have now been granted, according to the ministry.
Like soybeans, China’s primary sorghum supplier used to be the US, but the trade war has reshaped trade lines, pushing China closer to the South American agriculture giant Brazil.
Source: GACC
But there is one silver lining for US farmers. Japan has committed to purchasing USD 8 billion of US agricultural goods – including soybeans.
Greater China-EU Connectivity
And it’s not just Brazil that China is cosying up to. There have been several initiatives in recent weeks to enhance connectivity between Asia and Europe. In a bid to avoid geopolitical hotspots like the Suez Canal and South China Sea, China has been slowly building up the city of Chongqing in the southwest of the country to act as a rail hub for trade to Europe.
According to reports, the “Suez Canal on rails” sent its first shipment to Duisburg, Germany, this June. Rail freight is significantly faster than container shipping although volumes are much lower. Sending goods by the rail route from China to Europe can save 10-20 days on the typical transit time of 30-40 days by sea.
Although the railway will be constrained by volumes, China’s rail system allows it to avoid conflict zones like the Suez Canal and significantly speed up shipments to ASEAN neighbours such as Vietnam and Laos.
And as shipping insurance premiums rise and European port congestion worsens, alternative routes are likely to become increasingly popular.
And even container liners are innovating. This month, China’s Ministry of Transport released details of a new Asia-Europe route that promises an 18-day transit from East Asia to Northern Europe. The service, run by Haijie Shipping Company, calls at Qingdao, Shanghai, Ningbo-Zhoushan, Felixstowe, Rotterdam, Hamburg and Gdansk via the Russian Arctic.
This could be only the start of Arctic transit as container liners look for alternative routes amid geopolitical challenges.
Tariffs Remain a Major Lever
After President Trump’s tariffs were ruled as outside of his mandate in a 7-4 vote by the US Court of Appeals for the Federal Circuit, the US Supreme Court has agreed to an expedited review of the case. The tariffs will remain in place while the decision is made.
But even if the Conservative-majority Supreme Court upholds the ruling, the tariffs are unlikely to simply go away. The US president could still impose levies under Section 122 and Section 338 of the 1974 Trade Act, which allows for tariffs of between 15% and 50% and even outright import bans.
And protectionism and tariffs are spreading beyond just the US borders, with China imposing anti-dumping duties on over USD 2 billion of EU pork products. This is widely seen as retaliation for EU tariffs of over 45% imposed on Chinese EVs last October. The countries are currently in negotiations for a deal that would allow tariff-free sales on the condition that a minimum export price is established.
And despite a rise in protectionist measures, China’s ports registered growth in August, demonstrating that strict US tariffs don’t seem to be having a substantial impact on the country’s economy. According to trade data, the value of exports for the first eight months of 2025 reached USD 24.5 billion, up 4.4% on the year.
Although exports to the US dropped over 15% to USD 283 billion, exports to the EU were up 7.5% to USD 369 billion and to ASEAN countries, the rise was 14.6% to reach USD 434 billion.
Source: GACC
Price Pressures Continue
Input cost increases, weather‑driven crop issues and tariffs are combining to drive up consumer prices – and tariffs are not helping. In the US, it is the coffee lovers who are suffering.
Global supply constraints—with poor harvests in Brazil & Vietnam, plus tariffs on imports from Brazil—have driven US retail coffee prices up sharply. The consumer price index for coffee is up by about 21% year-on‑year.
Source: St Louis Fed
According to data from Vizion, US coffee imports have plummeted since the tariffs took effect – particularly from Brazil.
Source: Vizion
And in Pakistan, severe flooding in the Punjab province has thrown its rice crop into jeopardy. Punjab is the largest rice producing region in the country but there are also fears that the floodwater could flow downstream into Sindh – the second largest producing region.
This doesn’t just have implications for Pakistan, but also for the world market. The Asian country is a major rice exporter, accounting for approximately 8% of all exports in 2025/26, according to the USDA.
Source: USDA
In Other News…
- French opposition has reportedly softened to the EU-Mercosur trade deal, paving the way for approval of the agreement by the European Commission. Major agricultural economies such as France and Poland have opposed the deal, concerned it will allow lower-priced farming imports into the bloc. The Commission has agreed to “closely monitor” imports and set up a EUR 6.3 billion (USD 7.4 billion) fund for farmers.
- After the government removed tax credits for imported biofuels, sales of renewable diesel and biodiesel into the US have declined, according to the EIA. Given that consumption of biofuels in the US is expected to increase to meet RFS mandates, this could be good news for US corn producers.
Source: EIA
- Food and drink inflation in the UK is expected to accelerate. The Food and Drink Federation said it now expects a 5.7% rise in the cost of food by the end of 2025.
Source: ONS
- President Trump has threatened new tariffs – this time as punishment for countries adopting the IMO’s Net Zero Framework, which would impose fees on ships breaching carbon emissions standards. The original deal was passed by 63 states and is expected to be finalised in the October IMO meeting.
- The EU has added SAF to its investigation into anti-subsidy measures on Indonesian biofuels. The EU first imposed countervailing duties on Indonesian biofuels in 2019 but in December 2024, an expiry review was triggered. The investigation will now include SAF under various TARIC codes.
