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China imports $14B of soybeans from the US annually. In response to US Tariffs, China has put Tariffs on US soybeans and is switching to Brazil for their beans.

In the long term and based on history, can one expect that Brazil will retain China's business after the tariffs are sorted out between the US and China? Or is their some economic force (price?) that would shift the soybean market back from Brazil to US farmers/

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We don't know. Consider the following possibilities:

  1. The tariff lasts long enough that the United States soybean farmers switch from soybeans to some other crop. When the tariff is dropped, they don't change back. Brazil keeps the business.

  2. Brazilian farmers open new land and buy equipment specifically for soybeans. When the tariff ends, Brazil and the US split the business in some fashion (implicitly via market actions). Some farmers in both countries may go out of business or switch crops as a result.

  3. Brazilian soybeans that had shipped to Europe are now shipped to China. Europeans buy soybeans from the US that they had bought from Brazil. Transport costs may climb, but both the US and Brazil continue to produce soybeans at about the same rate as they did prior to the tariff. When the tariff goes away, business patterns may go back to the previous pattern.

  4. The US uses soybeans to make biofuels or otherwise finds new ways to use soybeans.

  5. Chinese consumers might replace some soybeans with some other food in their diet. Maybe they decide they like the new food better and they never eat as many soybeans as they did previously.

  6. Producers and consumers engage in long term deals. So once the market is changed, it stays changed even after the impetus for change is gone.

We might know how much of the soybean market is dominated by long term deals, but other than that, we don't really know how things will change. It's quite possible that all these things happen to some level.

When something like this happens, it may make both permanent and temporary changes. Someone might be able to work out a model whereby we can speculate as to how much of the change would be permanent and how much would be temporary. But any such model is going to be somewhat of a guess.

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