In the latest salvo of trade actions between the U.S. and Chinese governments, the Chinese Ministry of Commerce (MOC) announced plans today to impose a 25 percent tariff on $50 billion of U.S. goods, including soybeans, aircraft and automobiles, according to the Chinese News Agency, Xinhua. The Commerce Ministry said the tariff would be imposed on 106 items of products under 14 categories – but the date of implementation will depend on when the U.S. government imposes tariffs on Chinese products.
The latest announcement from China comes after the Trump administration announced in late March that about $3 billion in steel and aluminum tariffs would be put in place to protect national security. Although several countries would be impacted, the target was clearly China – the largest global producer of steel and aluminum. On Monday, China returned fire by imposing similar measures on $3 billion worth of U.S. pork, fruit, wine, nuts and other items.
Then on Tuesday, the U.S. Trade Representative published a list of 1,300 Chinese exports, worth about $50 billion, that could be hit with a 25 percent tariff to punish the Asian giant for stealing U.S. trade secrets, intellectual property and innovation. Written comments on the proposal are due May 11 and the Section 301 Committee will convene a public hearing at the U.S. International Trade Commission on May 15. But the Chinese didn’t waste any time firing back with the same level of tariffs. And this time the Chinese broadened its aim at U.S. agriculture, adding soybeans into the mix.
The Ministry of Commerce (MOC) said in a statement Wednesday that the U.S. move was “an evident violation of relevant rules of the World Trade Organization (WTO).” The U.S. move “severely infringed on the legitimate rights and interests that China enjoys in accordance with the WTO rules, and threatened China’s economic interests and security,” the MOC said.
Soybean farmers are one of the most vulnerable to Chinese retaliation because they depend on that market to buy about $14 billion worth of the crop every year. Purdue University researchers, at the behest of the U.S. Soybean Export Council, took a look at some possible outcomes if China retaliated against new U.S. tariffs by hitting its soybean exports.
Under the best-case scenario – a 10 percent tariff – U.S. exports to China would fall by a third, causing overall U.S. soybean production to drop by 8 percent. In the event of a 30 percent tariff, the researchers say U.S. exports to China would fall by 71 percent and total U.S. soybean production would decline by 17 percent.
Many commodity analysts hope that cooler heads will prevail and that this global “war of words” will result in more robust trade negotiations. But for now, the Trump administration is showing no signs of backing down on the potential for tariffs.
The Trump administration appears to be working on ideas for compensating farmers who may be harmed by China’s retaliatory tariffs on U.S. commodities, including soybeans, pork, nuts and fruit. Talking to reporters during a tour yesterday in Michigan, Agriculture Secretary Sonny Perdue says the plan will send a signal to China, but he wasn’t ready to offer specifics.
“We’re discussing that right now, but I’m not at liberty to talk about those kinds of things from a mitigation perspective,” Perdue said. “And at the proper time we will let China know they will not be able to affect our agricultural policies and our political decisions over trade by … holding agriculture hostage.”
Former Sen. Max Baucus, who co-chairs Farmers for Free Trade, expressed concern that the list will further threaten U.S. producers. “First, the tariffs the U.S. announced today will make the ag equipment and inputs they rely on more expensive. Then they’ll face new tariffs on their exports when China retaliates.”