US-China trade war ratchets higher as feed producers feel effects
Trade tensions between the US and China saw new steps taken Thursday as the US applied a 25% tariff on $16bn in goods imported from China. The action was taken in response to China’s trade practices regarding the reportedly forced transfer of technology and intellectual property, according to the office of the US Trade Representative (USTR).
This is the second set of tariffs brought by the US in regards to concerns related to a Section 301 investigation, and public comments on proposed 25% tariff for an additional $200bn in products are currently being considered. Previously, the US had applied tariffs on about $34bn in imports from China on July 6.
China responded Thursday by adding a 25% tariff to a list of US products amounting to about $16bn and filed a lawsuit with the World Trade Organization. A spokesperson with the Chinese Ministry of Commerce added that the action was a violation of WTO rules.
“China firmly opposes and has to continue to make the necessary counterattacks,” the spokesperson said in an unofficial translation. “At the same time, in order to defend free trade and the multilateral system and defend its legitimate rights and interests, China will file a lawsuit against this taxation measure under the WTO dispute settlement mechanism.”
The list of additional products includes fishmeal and flour for use in animal feed, according to an unofficial translation of the list released by the US Department of Agriculture. However, China had previously established 25% tariffs on other feeds and feed ingredients including corn, soybeans, sorghum, alfalfa and wheat, along with beef, pork, poultry and dairy products and fish.
Navigating tariff, trade damage
Feed crop producers remain committed to trade, said John Duff, analyst with the National Sorghum Producers (NSP). There is an understanding that the environment has not been competitive and that the playing field was not level.
“The playing field needs to be leveled out,” he told FeedNavigator. “But the challenge is that damage has been done.”
Sorghum producers have seen an average price drop of about $1.20 since the trade uncertainty and tariffs with China started, he said. “There has been damage done, absolutely – the key is how do we mitigate that? And how do we keep everyone in business?”
There have not been many large exports of sorghum in the past four months, he said. Buyers have been leaving the market because of the risk involved.
However, at this point, it is hard to tell if there will be long-term damage to trade relationships or a one-year damage to prices, said Duff. Sorghum’s primary buyer used to be Mexico, however, buyers there had been priced out of the market by China in recent years, which now gives producers the chance to reestablish some of those relationships and seek new trading partners.
“The China tariff allowed us to go out and work with new end users – we’re making the best of it,” he said. “It’s kind of going to be a waiting game.”
Sorghum faced a 178.6% anti-dumping duty on products going to China from mid-April to mid-May this year, however that is no longer in effect.
The most recent addition of tariffs is a situation that NSP is monitoring, said Duff. “Uncertainty is killer – not having certainty in the market makes it hard to move grain, but we’re still competitive,” he added.
For soybean producers, who also have a major market interest in China, there has been damage to the export market from tariffs, said John Heisdorffer, president with the American Soybean Association (ASA). “China is still our biggest customer and we’re losing out on a lot of sales,” he added.
Soybeans are having a ‘fire sale’ at the moment, which has increased exports to areas like Europe, but the group also is working to develop alternative markets, he said. “We spent 30-40 years to get the markets we had in China so it won’t be flipping a light switch – and we’ve had sales into other countries but they’re not as big, and to increase those sales it takes a lot of work.”
In addition to the tariffs, USDA predictions of larger carryovers and a large crop also are putting a damper on prices, he said.
However, the most recent round of tariffs are not expected to negatively influence sales, he said. “I think they’re gone, and that’s all there is to it,” he added.
“Everything just becomes more strained because of bigger numbers,” said Heisdorffer. “But really when July 6 hit we lost trade and that’s going to be it and it will be hard to get it back.”
“When you’ve had a relationship for a long time, why should the buyer and seller be affected by [country disagreements] but it does strain relationships,” he said. “If the countries don’t get along, it’s hard for the buyer and seller to now see things in the same light.”