Key Takeaways
- Trade wars create massive volatility in agricultural and industrial commodities
- Soybeans, steel, and aluminum were ground zero in the US-China conflict
- Tariff announcements often come outside market hours — gap risk is extreme
- Trade tensions shift global supply chains — some countries win, others lose
- Political tweets became legitimate trading signals — adapt or die
The New Normal: Politics as Price Discovery
For decades, commodity traders focused on supply and demand. Weather. Harvests. Inventories. Technical charts.
Then came 2018. And everything changed.
Suddenly, the most important variable wasn't rainfall or shipping costs. It was a Twitter feed.
"We had to hire people to monitor Trump's Twitter 24/7. A single tweet could move markets more than a drought. It was insane."
— Chicago Futures Trading Desk Head
The US-China trade war didn't just affect trade. It redefined how futures markets work. Politicians became price-setters. Tariffs became technical indicators. And traders who didn't adapt got destroyed.
The Weapons of Trade War
Before we dive into the chaos, understand the arsenal governments use:
Tariffs
Taxes on imports. 25% tariff means goods cost 25% more. Demand shifts. Supply chains relocate.
Quotas
Limits on import volumes. "Only 1 million tons of steel allowed." Creates artificial scarcity.
Entity Lists
Ban specific companies from trading. See: Huawei. Destroys supply chains overnight.
Forced Purchase Agreements
"China will buy $200B of US goods." Creates artificial demand. Markets front-run the flow.
Each weapon affects different commodities differently. And each announcement creates trading opportunities — if you're ready.
Ground Zero: Soybeans
No commodity took a beating like soybeans. Here's why they became the trade war's primary victim:
- US exports 40% of its soybean crop
- China buys 60% of all traded soybeans globally
- US soybeans to China = $14 billion/year
- Key soybean states voted for Trump — political target
China knew exactly where to hit. Soybeans were the perfect retaliation target — economically significant AND politically painful.
American farmers watched their soybeans rot in silos. Brazil captured the China market. The trade war cost US farmers an estimated $27 billion in lost exports.
The Brazil Windfall
Brazil's soybean exports to China jumped 30% overnight. Brazilian farmers became the accidental winners of America's trade war. São Paulo's commodities exchange went wild.
Steel and Aluminum: Industrial Warfare
While soybeans got the headlines, steel and aluminum were where the war started — and where domestic winners emerged.
In March 2018, Trump announced 25% tariffs on steel imports and 10% on aluminum. The stated reason? "National security."
US Steel Wins
US Steel stock doubled. American producers no longer had to compete with cheap Chinese metal. Margins exploded.
Auto Makers Lose
Ford, GM, Toyota saw input costs spike. Every car uses 2,000 pounds of steel. Billions in added costs.
Beer Cans Cost More
Aluminum tariffs hit beverage makers. MillerCoors warned of 20,000 job losses. Consumers paid higher prices.
Global Retaliation
EU, Canada, Mexico all retaliated. US bourbon, motorcycles, jeans all hit with counter-tariffs.
"Trade wars are good, and easy to win."
— Donald Trump (the market disagreed)
The Tweet Heard Round the World
August 1, 2019. 1:26 PM Eastern. A tweet appears:
...additional Tariffs of 10% will be placed on the remaining 300 Billion Dollars of goods and products coming from China into our Country. This does not include the 250 Billion Dollars already Tariffed at 25%...
$300 Billion in Seconds
This single tweet tariffed $300 billion of Chinese goods. S&P futures dropped 1.5% in minutes. VIX spiked 20%. The Dow fell 600 points at the open.
The following week was pure chaos:
- S&P 500 fell 6% in 4 days
- Yuan fell through 7.0 (key psychological level)
- Gold spiked to 6-year highs
- Soybean futures hit 10-year lows
The Phase One Deal: False Dawn
After two years of escalation, exhaustion set in. In January 2020, the US and China signed the "Phase One" trade deal.
The key promise: China would buy $200 billion more in US goods over two years — including $32 billion in agricultural products.
Ag Purchases
$32B in soybeans, pork, corn. Markets rallied on optimism. Farmers celebrated.
Energy Purchases
$52B in oil, LNG, coal. American energy producers saw a potential windfall.
Manufactured Goods
$78B in aircraft, machinery, pharmaceuticals. Boeing was supposed to benefit.
Reality Check
COVID hit. China bought only 58% of promised goods. The deal quietly died.
"Phase One was a political document dressed up as a trade deal. Markets traded it both ways — on the promise AND the failure."
— Trade Policy Analyst
The Trader's Playbook for Trade Wars
Trade wars create chaos. But chaos creates opportunity. Here's how the pros navigated it:
Monitor Headlines 24/7
Trump tweeted at 6 AM, 2 PM, midnight. Trade reps spoke on weekends. You need alerts on everything.
Trade the Pairs
Long Brazil soybeans / Short US soybeans. Long US steel / Short steel users. Winners and losers are clear.
Reduce Size, Increase Frequency
Gap risk was massive. Better to trade smaller and take quick profits than get caught in an overnight tweet massacre.
Follow the Supply Chain
Tariffs on China → Production moves to Vietnam, Mexico. Those markets rallied while China fell.
The Algo Arms Race
Quant funds built NLP (natural language processing) models to parse Trump tweets in milliseconds. By the time humans read the tweet, algos had already moved the market.
Lessons for the Future
Trade wars didn't end in 2020. They evolved. Biden kept most tariffs. New tensions with Europe emerged. China-Australia trade collapsed. The lessons apply forever:
Globalization Is Fragile
40 years of trade integration can reverse in a tweet. Supply chains that took decades to build can break in months.
Know the Targets
Politicians target politically sensitive commodities. Soybeans hit Trump states. Bourbon hit Kentucky. Harley-Davidsons hit Wisconsin.
Think Second Order
Tariffs on X country benefit Y country. US-China tensions benefit Vietnam. Russia sanctions benefit India.
Hedge Political Risk
Options are your friend. Overnight gaps from political announcements can be unhedgeable with stops alone.
Trade wars aren't about trade. They're about power. And when governments fight for power, futures markets become the battlefield. The traders who survived 2018-2020 learned to read politics as fluently as they read charts. In the new world, political literacy is a trading edge. Ignore it and you'll be the one paying tariffs — on your P&L.