The Great Soybean Divorce: How China Moved On from America

by Michael Hudson

Trump’s policies are destroying key elements of U.S. economic prosperity

Trump has created a crisis for U.S. agriculture with his Cold War weaponization of foreign trade with China and Russia, for manufacturing as a result of his steel and aluminum tariffs, for consumer price inflation mainly from his tariffs, and for affordable housing with his tax cuts that have kept long-term interest rates high for mortgages, auto and equipment purchases, and deregulation of markets giving a free hand to monopoly pricing.

1. Trump’s impoverishment of U.S. agriculture

Trump has created a perfect storm for U.S. agriculture, first in his Cold War policy that has closed off China as a soybean market against Russia, second in his tariff policy blocking imports and thus raising prices for farm equipment and other inputs, and third in his inflationary budget deficits that are keeping interest rates high for housing and farm mortgage loans and equipment financing – while keeping farmland prices low.

The most notorious example is soybeans, America’s major farm export to China. Trump’s weaponization of U.S. foreign trade treats exports and imports as tools to deprive foreign countries dependent on access to U.S. markets for their exports, and on U.S.-controlled exports of essential commodities such as food and oil (and most recently, high technology for computer chips and equipment). After Mao’s revolution in 1945, the U.S. imposed sanctions on U.S. grain and other food exports to China, hoping to starve out the new Communist government. Canada broke this food blockade – but it has now become an arm of U.S. NATO foreign policy.

Trump’s weaponizing of foreign trade – keeping open a constant U.S. threat to cut off exports on which other countries have come to depend – has led China to totally stop its advance purchases from this year’s U.S. soybean crop. China understandably seeks to avoid being threatened by a food blockade again, and has imposed 34% tariffs on U.S. soybean imports. The result has been a shift in its imports to Brazil, with zero purchases in the United States so far in 2025. This is traumatic for U.S. farmers, because four decades of soybean exports to China have resulted in half of U.S. soybean production normally being exported to China; in North Dakota the proportion is 70%.

China’s shift in its soybean purchases to Brazil is irreversible, as that country’s farmers have adjusted their planting decisions accordingly. As a member of BRICS, especially under President Lula’s leadership, Brazil promises to be much a more reliable supplier than the United States, whose foreign policy has designated China as an existential enemy. There is little chance of China responding to a U.S. promise to restore normal trade by shifting its imports away from Brazil, because that would be traumatic for Brazilian agriculture and would make China an unreliable a trade partner.

So the question is, what is to become of the enormous amount of U.S. farmland that has been devoted to soybean production? Unable to find foreign markets to replace China, farmers are reported to suffer a loss on their soybean production, which is piling up in excess of existing crop storage capacity. The result is a threat of farm foreclosures and bankruptcy, which would lower prices for farmland. As interest rates remain high for long-term loans such as mortgages, this deters small farmers from acquiring troubled properties. The result is to accelerate the concentration of farmland in the hands of large absentee financial funds and the wealthy.

This shift is irreversible. Despite the Supreme Court ruling that Trump’s tariffs are unconstitutional and therefore illegal, it seems likely that Trump could simply have the bipartisan anti-China Congress and Senate impose these tariffs. In any case, Trump’s policy represents a sea change, a quantum leap into U.S. coercive trade aggression.

There is zero chance of U.S. China trade in soybeans or other basic Chinese needs being revived. Neither it nor other countries threatened by U.S. trade aggression can take the risk of depending on the U.S. market.

America’s agricultural cost and income squeeze goes far beyond soybean sales. Production costs are also rising as a result of Trump’s tariffs, especially on farm machinery, fertilizer and credit tightness as the risk of farm debt arrears increase.

2. Trump’s tariffs are raising U.S. industrial costs of production

Trump’s tariff anarchy also is causing losses and layoffs of two thousand employees for John Deere and Company, with demand also falling for other manufacturers of farm equipment. The most serious problem is that harvesting equipment, like automobiles and all other machinery, is made out of steel, along with aluminum. Trump has broken the basic logic for tariffs – to promote the competitiveness of high-profit capital-intensive industry (especially for established monopolies), largely by minimizing the cost of raw materials. Steel and aluminum are basic raw materials.

These tariffs have hit John Deere in two ways. For its domestic production, sales are low because of the depression of farm income cited above. Yields have soared this year for corn as well as soybean, leading their prices and farm income to decline. That limits the ability of farmers to buy new machinery.

Deere imports about 25 percent of the components of its products, whose cost is increased as a result of Trump’s tariffs. Deere’s manufacturing facilities in Germany have been especially hard hit. Trump surprised Deere by ruling that over and above his 15% EU import tariffs, he is imposing a 50% tax on the steel and aluminum content of these imports.

That also hits foreign producers of farm equipment, leading to new complaints by EU about Trump’s constant “surprises” in adding to his demand for “givebacks” in exchange for not raising tariffs on imports from the EU even further.

3. Trump’s fight to accelerate foreign reliance on oil and hence global warming

Opposing any alleviation to global warming, Trump has withdrawn from the Paris agreement and has cancelled subsidies for wind power, and also for public transportation. This is the effect of lobbying by the oil industry. Not only is U.S. foreign policy dominated by the demand to control oil as the key to weaponizing foreign trade sanctions, but also U.S. domestic economic policy. Soon after World War II ended, Los Angeles tore up its streetcars, forcing its inhabitants to join the automobile economy. Dwight Eisenhower initiated the interstate highway program to favor auto transportation – and with it the consumption of oil.

Also plaguing U.S. agriculture is a deepening water shortage for crops and destruction caused by flooding, drought and other extreme weather. One cause is the extreme weather resulting from global warming, which Trump denies as part of his policy to support U.S. oil and coal while actively fighting against wind and solar energy production. He has withdrawn U.S. support for the Paris Agreement with other nations to de-carbonize world production.

Insurance costs are rising to unaffordable levels for many areas most prone to storms and flooding, much as the annual cost of housing has soared in Miami and other Florida cities and the southern border states threatened by hurricanes.

A parallel disruption is the rising electricity price as well as a water shortage caused by the rising demand to cool the computers needed for Trump’s support of artificial intelligence and quantum computing. The increasing demand for electricity is far beyond the investment plans by power utilities to increase their production. Such planning takes many years – and utilities are happy to see the shortages push demand far above supply, enabling prices for electricity to be one of the major contributors to inflating the cost of production.

In sum, we see the US economy moving away from policy based on economic objectives, however unsound they appear, and towards one where raw power and vindictiveness are distractive tools intent on rewarding campaign contributors.