U.S. and China steps bring trade war closer

by Jay Sjerven
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Trade tensions between the United States and China were heightened this week.
 

WASHINGTON — Trade tensions between the United States and China were heightened this week as each nation prepared to impose tariffs on several key products imported from the other. World equity markets, already volatile, slumped amid concerns the tit-for-tat actions may devolve into a trade war between the world’s two largest economies. Agricultural producers in the United States voiced their complaints that they and their products were needlessly caught in the crosshairs.

The Office of the U.S. Trade Representative on April 2 proposed a list of products imported from China that may be subject to additional tariffs (increases of mostly 25%). This resulted from a U.S.T.R. Section 301 investigation that concluded that China has coerced American companies into transferring their technology and intellectual property to domestic Chinese enterprises. President Trump, pointing to those findings, last month announced the United States would impose tariffs on approximately $50 billion worth of Chinese products. That total was viewed as commensurate with the economic harm caused to the U.S. economy by China’s “unreasonable technology transfer policies,” the U.S.T.R. said.

The U.S.T.R.’s proposed list of Chinese products to be subject to increased tariffs covers about 1,300 separate tariff lines and will undergo further review in a public notice and comment process, including a hearing.

“After completion of this process, U.S.T.R. will issue a final determination on the products subject to the additional duties,” the U.S.T.R. said.

Indications were the public hearing on the proposed tariff list will be held on May 15 with public comments accepted through May 22.

Chinese sectors subject to the proposed tariffs include industries such as aerospace, information and communication technology, robotics and machinery.

China’s response to the American trade threat was prompt, with the Chinese government issuing its own list comprising 106 products imported from the United States that will be subject to increased tariffs (mostly 25% increases) should the U.S. government implement its own proposed new tariffs. The principal U.S. agricultural export targeted by China was soybeans.

John Heisdorffer, an Iowa farmer and president of the American Soybean Association, said, “It should surprise no one that China immediately retaliated against our most important exports, including soybeans. We have been warning the administration and members of Congress that this would happen since the prospect for tariffs was raised. That unfortunately doesn’t lend any comfort to the hundreds of thousands of soybean farmers who will be affected by these tariffs. This is no longer a hypothetical, and a 25% tariff on U.S. soybeans into China will have a devastating effect on every soybean farmer in America.”

Mr. Heisdorffer urged the Trump administration to withdraw its proposed tariffs.

“China has said that its 25% tariff will only go into effect based on the course of action the administration takes,” he said. “We call on President Trump to engage the Chinese in a constructive manner — not a punitive one — and achieve a positive result for soybean farmers.”

Soybean futures tumbled more than 30c a bu on April 4 in the wake of the Chinese announcement, and soybean oil futures at one point dropped 1c a lb, which encouraged several soybean oil users to extend their physical coverage to about 75 days compared with about 60 days before the announcement.

U.S. Wheat Associates and the National Association of Wheat Growers said U.S. farmers are in the line of fire in what appears to be an escalating trade war with China.

“People may not know that China imported more than 61 million bus of U.S. wheat in marketing year 2016-17, making it our fourth-largest buyer in the world,” said Mike Miller, U.S.W. chairman and a wheat farmer from Ritzville, Wash. “Farmers across the country have invested a lot of money and time over the years to develop a Chinese market that has great potential to buy even more American wheat. Now that effort is in jeopardy at a time when big global supplies have already pushed farmgate wheat prices down to unsustainable levels.”

Jimmie Musick, president of NAWG and a wheat farmer from Sentinel, Okla., added, ”America’s wheat farmers are experiencing several hardships, and adding a 25% tariff on exports to China for U.S. wheat is the last thing we need during some of the worst economic times in farm country. In a trade war, agriculture is always the first target. The administration can support rural Americans by working with Chinese officials to avoid these damaging tariffs.”

Mr. Miller and Mr. Musick said wheat growers strongly support addressing real concerns about China’s trade policies but said their organizations preferred that the administration do that by employing processes already in place, as the administration has done by challenging China’s domestic support and tariff rate quota policies through the World Trade Organization.

Jay Timmons, president and chief executive officer of the National Association of Manufacturers, said, “Manufacturers agree with President Trump that China’s theft of American intellectual property and their use of unfair trade practices represent clear threats to manufacturers’ competitiveness and the jobs of American manufacturing workers. Tariffs are one proposed response, but they are likely to create new challenges in the form of significant added costs for manufacturers and American consumers. In addition to these challenges, tariffs also run the risk of provoking China to take further destructive actions against American manufacturing workers.

“If the imposition of tariffs is the first bid in negotiating a more level playing field, manufacturers believe the end product must be a new, strategic approach that includes negotiating a fair, binding and enforceable rules-based trade agreement with China that requires them to end their unfair trade practices once and for all.”
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By Matt Hernal 4/5/2018 2:26:46 PM