Russia to benefit from US -China trade war

In the current trade war between the U.S. and China, the latter has imposed tariffs on a range of American agricultural products, including soybeans, wheat, corn, meat and dairy products. In response, Russia is eager to increase its exports to the Chinese market, which is significant given the size of the Chinese market. The question of who will benefit and who will be negatively impacted by Donald Trump's latest trade measures is therefore highly relevant.This is the second time in a month that Donald Trump has imposed tariffs on China.
In February, tariffs of 10 percent were imposed on all Chinese imports, and on 4 March, these were doubled to 20 percent, with the U.S. accusing China of "failing to take action to stem the flow of synthetic opioids, including fentanyl." Mexico and Canada had previously agreed with the U.S. on a one-month extension in February, but that deadline has now expired, resulting in tariffs being imposed on their goods as well.

In response, China imposed duties on American hydrocarbons a month ago, and will now impose duties of 10-15% on American agricultural products, commencing March 10. Duties of 15% will apply to chicken, wheat, corn and cotton from the United States, and 10% will apply to sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables and dairy products. The list encompasses a total of 711 items.This development is expected to have a more significant impact on the US economy than the tariffs imposed on liquefied natural gas, oil, and coal, given the limited extent of their supply to China.
Agricultural exports account for more than 15% of the total US exports to China of $163.62 billion, which is almost $25 billion.

"For American exports, agricultural products are a sensitive issue, especially for a number of US states where these products are produced, for example, for the state of Iowa (the centre of corn production). China's actions could potentially impact a number of Republican-led states that rely heavily on exports to China. This is according to Sergei Tsyplakov, professor at the Faculty of World Economy and International Affairs at the National Research University Higher School of Economics.
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If the current trade tensions persist and President Trump maintains his current stance on tariffs, it could potentially lead to a significant influx of products seeking to replace American food exports to China.

Russia stands to benefit from this development, particularly in the context of increased opportunities for the export of chicken, pork, and beef to China. Notably, Russia has already replaced imports of chicken and pork products, and the potential for growth for our producers lies primarily in exports. However, we are yet to fully capitalise on the potential in beef production.Last year, the United States exported frozen boneless beef to China valued at $990 million and frozen pork by-products for $695 million.

While Russia has the potential to increase meat exports to China, the process will require careful consideration due to China's stringent phytosanitary and veterinary control measures in livestock farming. These requirements necessitate accreditation for enterprises seeking to enter the Chinese market.
At the same time, pork imports to China fell sharply last year, regardless of the United States, due to the development of domestic production.The demand for beef in China was high last year, but we have limited capacity to supply it.Moreover, there is strong competition from Australia, New Zealand and other players," says Tsyplakov.For a long time, Russian meat products could not enter the Chinese market at all, but in recent years this has been possible.
In 2018, China opened its market to Russian poultry and dairy products, and to Russian pork at the end of 2023.Last year, China certified 81 Russian meat production enterprises for export, 56 of which were for the production of poultry meat and offal, according to Rosselkhoznadzor.Pork exports increased by 20%, and Russia plans to conquer up to 10% of the Chinese pork market. Currently, only three Russian companies have access to China, and this list needs to be expanded.In the poultry and offal sector, Russia holds a strong second-place position in the Chinese market, with a 15% share. Notably, Chinese consumers have a particular affinity for chicken feet and chicken wings.
Additionally, Russia has emerged as the leading supplier of turkey meat in the Chinese market.However, it's important to note that Russia is not the only country aiming to secure a share of the lucrative Chinese market, which is also being targeted by other nations, including the United States. For instance, Brazil leads the poultry supplies to China, occupying almost 60% of this market.Russia has the potential to increase grain supplies to China, and in 2024, it set a record for soybeans, harvesting 7 million tons. However, it will not be possible to satisfy China's needs with such volumes. "We will not be able to replace American soybeans, since China annually imports about 100 million tons of soybeans, and we produce about 7 million tons per year. We supply it from the Far East and other regions, but we are not a major player in the market. However, we can quite increase supplies to China," Tsyplakov believes.

The United States has historically been a major supplier of soybeans to China. Last year, for instance, the US exported soybeans to China worth $12 billion. However, competitors such as Brazil and Argentina are poised to fill this gap in the market.
Russia is a global leader in wheat production and export, with the potential to significantly increase its exports to China. In 2024, we successfully increased our supplies to the Chinese market eightfold without experiencing any trade wars with the United States.However, it should be noted that there is considerable competition in the wheat market, with Canada and the European Union also being significant players.
Replacing American wheat in the Chinese market will undoubtedly be challenging in the short term. However, we are committed to gradually increasing our wheat supplies to China," says Tsyplakov.In terms of corn, the primary exporters are the United States, Brazil and Ukraine, not Russia, making it challenging for Russia to increase its corn exports.Russia does not produce cotton.We export fruits and vegetables, though not in large quantities.However, Russian dairy products show great promise for export growth, with their exports to China increasing severalfold last year. However, Tsyplakov notes that accreditation of enterprises for dairy products is a time-consuming process, and that strong competition from Australia and New Zealand is also a challenge. The European Union, notably Germany and France, is another significant player in the dairy market.

The US could face more difficulties than China in this regard. Firstly, China is open to all trade partners, while the US, in contrast, is imposing increasing tariffs, sanctions and embargoes, including against its partners, notably Canada and Mexico. Natalia Milchakova, a leading analyst at Freedom Finance Global, notes that Trump is preparing a trade war even against the European Union, his recent ally. Bloomberg believes that such a stringent policy could ultimately result in a 1% reduction in US GDP in 2025.
"The US has ample opportunities to find markets for its agricultural products intended for China, with India, countries of Southeast Asia, North Africa, Central Asia, and Turkey being prime candidates.However, a different challenge emerges when considering US tariffs on imported goods for nearly the entire global market. This may potentially hinder the country's ability to export its own products due to trade restrictions. Inflation in the US may rise again, not only because of Trump's tariffs on imported goods, but also because of pressure from the White House administration on the Federal Reserve System to reduce interest rates," says Milchakova.

As for China, it has a different problem – deflation due to low domestic demand, so it is not afraid of inflation acceleration. However, China has a tool at its disposal to support its exports and economy in the context of a trade war: a weakening of the yuan.In the initial phase of the trade war, China implemented this strategy, and it proved effective, with no decline in exports since 2018, when the first trade war began, and the identification of new markets in Asia.

Milchakova states that "China may well decide to weaken the yuan if the financial situation of its largest exporters, primarily the flagships of its high-tech sector and the auto industry, deteriorates significantly. But even if China weakens the yuan, its economy will only become stronger. Therefore, it is very premature to expect that the yuan, which may collapse against the dollar, will simultaneously collapse against the ruble. Milchakova also states that if oil continues to fall, and the Ukrainian issue is not resolved in the near future and sanctions remain, then no matter what happens to the yuan, the ruble will continue to weaken. While China's economy may slow down in 2025, we do not expect a recession in the Chinese economy. According to our forecasts, Chinese GDP growth will amount to 4.8-5% this year.