Brazil's exports dynamics amidst the US-China trade war

China has never looked back since overtaking the United States as Brazil’s main trading partner back in 2009. In fact, data on a 12 month rolling basis show that over the past year China has further cemented its position as Brazil’s top export market increasing its market share by 5 pp since November 2017 to now account for 30% of Brazil’s exports. At end 2017, Brazil already exported USD 20 bn more to China than it did to the US (USD 47.5 bn vs USD 27.2 bn) and while Brazil has a trade surplus with both economies, the surplus with China was roughly 10 times larger than that with the US (~ USD 20 bn). The recent surge in the data results in part from Brazil capitalizing on the US-China trade war in particular regarding the redirection of soybean trade. Soybeans exports alone covered (in USD terms) the equivalent of about 1.5 times Brazil’s five main exports to the US in 2017.

Surely, Brazil’s exports suffer from concentration risk as 80% of its soybeans, 50% of its ores and 35% of its mineral fuels and oils (including crude) exports are absorbed by China. As Bolsonaro gets sworn in, there is no doubt that cherishing his relationship with Beijing will go a long way to upholding Chinese trade and investment in the country (Brazil’s attracts more than half of all Chinese FDI in Latin America). Bolsonaro’s visit to Taiwan in 2018, his comments about “China buying Brazil” and his appointment of a pro-US Minister of Foreign Affairs has nonetheless left most observers wondering whether his geopolitics will “trump” Brazil’s economic interests.