Agriculture ETFs Reel as China Raises Tariffs on American Goods

China’s decision to raise tariffs on U.S. goods targeted a range of U.S. agricultural goods, weighing on soft commodity and livestock exchange traded products.

Beijing raised levies on agricultural goods, including an added 5% tariff on soybeans and 10% on American pork, along with corn and cotton products, in retaliation to President Donald Trump’s latest plans to hike tariffs on Chinese imports.

Agriculture-related ETFs were under pressure Friday after China’s decision to raise tariffs on a number of U.S. goods. The Teucrium Soybean Fund (NYSEArca: SOYB) fell 1.1%, Teucrium Corn Fund (CORN) dropped 0.6%, iPath Series B Bloomberg Cotton Subindex Total Return ETN (NYSEArca: BAL) was 1.2% lower and iPath Series B Bloomberg Livestock Subindex Total Return ETN (NYSEArca: COW) decreased 3.0%.

CBOT soybean futures were down 1.4% to $8.565 per bushel, ICE cotton #2 futures dipped 1.2% to $0.5821 per pound and CME lean hog futures declined 4.8% to $0.593 per pound. CBOT corn futures slipped 0.9% to $3.678 per bushel, but China is no longer a big buyer in U.S. corn and traders were more focused on Midwest crop development than any escalation in the trade war.

China is the world’s top soybean importer and already held a 25% tariff on the U.S. crop. The emerging market has reduced purchases of American farm goods for months as tensions between the two largest economies in the world boiled.

“As far as supply and demand, it means nothing because buyers weren’t buying anyways,” Arlan Suderman, chief commodities economist at INTL FCStone, told Bloomberg. “It’s more about making headlines than it is actually changing the amount of soybeans that flow between the U.S. and China.”

Harvests on this year’s soybean crops will start in September, and stockpiles are expected to reach an all-time high for the season that ends this month due to diminished U.S. exports.

Ken Eriksen, senior vice president at Agribusiness Intelligence IHS Markit, warned that the trade war will keep some U.S. supplies out of the export market.

“The seesaw, back-and-forth action of the last few weeks, this is just more damaging to seeing soybean exports, pork exports and beef exports to continue going to China,” Eriksen told Bloomberg.

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