A possible trade war between China and the United States could have negative economic consequences for the globe, but also offers opportunities for countries such as South Africa in terms of the global food and agricultural value chain, Old Mutual said on Wednesday.
The possibility of such a war between the world’s two largest economies has been in focus after US President Trump announced tariffs on Chinese goods and China retaliated with tariffs on mostly agricultural imports from the US.
Although this has created acute global uncertainty, astute South African investors should see this as an opportunity to invest in the global food and agriculture value chain, said Chris Potgieter, head of Old Mutual Wealth Private Client Securities.
“Right now, for example, China is threatening counter measures by increasing tariffs on 106 US agricultural exports, including soybeans, which will likely play out in a way that handicaps some agricultural players, while benefiting others,” he said.
He singled out soybeans, noting that China was the second-largest market for US agricultural exports, of which the beans had historically been one of the top agricultural products.
“China’s announcement to introduce duties on these exports will therefore negatively impact the American farming community who historically export soybeans to China, while American food producers who use soybeans as an input for manufacturing other foods downstream in the value chain will benefit from this,” Potgieter said.
Winners with regard to this specific commodity would be countries such as South America, Australia and even South Africa, who were able to deliver soybeans to both the US and China.
“Given the current state of the global economic landscape, astute South African investors have the opportunity to invest in the various agricultural producers who stand to substitute production from either the US or China, as well as the broader food and agriculture value chain to the extent that food manufacturers can, in some instances, benefit from lower input prices,” Potgieter said.