China matched the United States overnight in a rapidly escalating trade battle over high technology and intellectual property rights, with each listing $50 billion in potential tariffs on the other. China’s cited U.S. soybeans, cotton, corn, frozen beef and durum wheat for 25 percent duties — high enough to price them out of the market — among its list of targets.
Beijing said implementation of the tariffs would depend on when the Trump administration takes action on its list. At the start of this week, China imposed a 25 percent tariff on U.S. pork and a 15 percent tariff on ethanol, apples and almonds, as a counter-measure to newly imposed U.S. steel and aluminum tariffs.
China is the largest customer in the world for U.S. farm exports, responsible for $1 in every $6 of ag exports. Soybeans are the largest U.S. farm export to China, worth $14 billion a year. A 25 percent tariff would raise the price of soybeans by $110 per tonne, making U.S. oilseeds uncompetitive, said AgriCensus.
When Chinese officials met a delegation of U.S. senators last week, they were gentle but firm in saying their government would respond to adverse U.S. moves, said Iowa Sen. Chuck Grassley during a tele-conference. At times, the Chinese comments were indirect but “they’ve indicated soybeans is on of the things they will take action against.”
Grassley told reporters on Tuesday “only time will tell” if President Trump will prevail. “All I can say is maybe in one sense, maybe Trump is making some progress,” said the Republican senator, pointing to modifications of the U.S.-Korea free trade agreement that will allow more U.S. cars into South Korea. “Maybe it might work but I’m very cautious. I will be doing everything I can to see that things don’t hurt agriculture in the United States but specifically Iowa.”
U.S. trade representative Robert Lighthizer released a list of 1,300 Chinese products, mostly in the aerospace, information and communications technology, robotics and machinery sectors, that are being considered for the $50 billion in tariffs on Tuesday. The final list will be published after a review of public comments.
Rural America voted in a landslide in 2016 for Trump, who campaigned on a platform of less federal regulation, tax reform and support for corn ethanol. Farm groups were uneasy about his pugnacious approach to foreign trade, which included withdrawal from the 12-nation Trans-Pacific Partnership trade pact and renegotiation of NAFTA, but hoped to persuade him of the importance of exports to farmers. Twenty cents of each $1 in net farm income is generated by food and agriculture exports.
Farm-state senators repeatedly made that point to Trump and his trade team, said Grassley. “I told President Trump to his face…you’ve got to be pretty cautious. I’m not saying you can’t get a better deal but it’s tricky” and agriculture is one of the first targets for retaliation. Trump “won some points” by modifying trade terms with South Korea. “The president is in the driver’s seat on this. All we can do is tell him how we feel about it.”
China recalibrated its farm subsidies to favor soybeans over corn in four northern provinces this year, said AgriCensus, citing a joint statement from the ministries of Agriculture and Commerce. Beijing is trying to reduce its burdensome stockpile of corn, which amounts to more than four of every 10 bushels in storage worldwide. At the same time, it grows less than one-tenth of the soybeans that it consumes. Roughly one-third of all the soybeans grown in the world are consumed in China, as a food ingredient and in livestock rations.
The USTR list of Chinese products that could face tariffs is available here.