This paper investigates the impacts of China’s import tariffs on U.S. soybean exports in mid-2008 on price diffusion and information transfer relationships between futures prices in the U.S., China, and Brazil. About a third of U.S. soybean production was exported to China so the import tariff on U.S. soybean exports induced China to increase imports from Brazil, mitigating the effect of the tariff on China’s domestic prices. Nevertheless, U.S. soybean cash and futures prices plummeted while Brazilian export prices rose in the months ahead.

To assess the information transfer relationships, we use vector autoregressive model to generate pairwise tests on the causal covariate differences between the U.S., China, and Brazilian soybean futures prices before and after mid-2008. Results show that previous patterns of price signaling between the U.S. close and China open, and the China close and U.S. open, have all but evaporated since the import tariffs imposed on U.S. exports to China in mid-2008, and recovered only by September 2020. We show, with no ambiguity that where complementary, and causal, price signals between the U.S. and China exchanges were strong and significant at the 1 percent level prior to the tariff, signaling lost all significance up to the 10 percent level thereafter. In contrast, the China close and Brazil open have strengthened throughout the time period with price signalling from China to Brazil became significant at the 1 percent level after the tariffs were imposed and also significant from Brazil to China. This import tariff provided a natural experiment on the effects of a tariff on price information transfers between different markets worldwide as global trade patterns in soybeans changed. We also consider the signaling effect between U.S. soybean futures price and the spot price in China.