US-China tariff spat escalates on food products as dairy innovation deal is signed
03 Apr 2018 --- In its first retaliatory move since President Trump’s earlier tariffs on steel and aluminum, China has suspended tariff concessions, some reaching up to 25 percent, on a wide range of US food products. Products affected include frozen pork, almonds, pistachios, wine and fresh and dried fruit. To compensate for losses because of the steel and aluminum tariffs imposed by Trump, China’s Ministry of Finance is now imposing the punitive measures on food, having previously warned that it would do so in an earlier announcement in March.
China’s list covers 128 products with the government imposing a 15 percent tariff on 120 categories (US$1 billion) covering products like fruit and wine, and the second group of eight product lines worth a further US$2 billion, like the 25 percent tariff on pork.
Notably, China’s tariffs do not cover soybeans, a key export from the US. Dairy is unaffected by the tariffs, with The US Dairy Export Council having just signed a new agreement on March 30, aimed at ultimately increasing exports (see below).
A statement from China’s Ministry of Commerce reads (translated): “The fact that the United States imposed tariffs of 25 percent and 10 percent on imported steel and aluminum products on the grounds of 'national security' actually constitutes a safeguard measure.”
“According to the relevant provisions of the WTO Agreement on Safeguard Measures, China has formulated a list of suspension of concessions. If China and the United States fail to reach a trade compensation agreement within the stipulated time, China will exercise the right to suspend concessions for the first part of the product; China will implement the second part list after further evaluating the impact of the US measures on China.”
“China reserves the right to adjust measures based on actual conditions and will implement the necessary procedures by relevant WTO rules.”
The statement concludes with China urging the US to resolve its concerns as soon as possible, resolving differences through “dialogue and consultation, and avoid harming the overall situation of Sino-US cooperation.”
For a while, President Trump has criticized what his administration perceive as unfair trading practices in China which have culminated in a sizeable trade deficit.
According to data from the US Census Bureau and US Bureau of Economic Analysis, the deficit with China increased US$0.6 billion to US$34.0 billion in December 2017. Exports increased US$1.1 billion to US$11.9 billion and imports increased US$1.7 billion to US$45.9 billion.
With US-China ties at a low, there is some debate that this may not be the end to trade sanctions and tariffs from both sides. Meanwhile, other markets could potentially exploit opportunities.
However, the US industries – pork producers and fruit producers from California – affected by the tariffs have much more immediate concerns about how prices will be pushed up and the impact this will have on their businesses.
US pork producers hope the 25 percent tariffs will be short-lived.
“We are disappointed that China has placed an additional 25 percent tariff on US pork exports,” says National Pork Producers Council (NPPC) CEO Neil Dierks.
“Exports are extremely critical to the financial well-being of our producers. Over the past ten years, the US, on average, has been the top exporter of pork in the world, and we’re the lowest cost producer. In any given year, we export pork to more than 100 nations and those exports support 110,000 American jobs.”
He said that almost US$6.5 billion of US pork was exported last year, which was more than 26 percent of US pork production. China was the third largest value market, with more than US$1 billion in US pork being shipped there last year.
“We recall that not long ago there was serious talk about termination of the US-Korea FTA. We are pleased that the US and Korea were able to reach an agreement that has not prejudiced US pork producers or other sectors of US agriculture. We recognize that the US and China are negotiating and we are hopeful that the 25 percent tariffs on US pork will be short-lived.”
Meanwhile, Sara Neagu-Reed, legislative associate for the California Farm Bureau Federation, is concerned about the impact on the State’s fruit farmers.
“California farmers depend on trade for a living, so we are quite concerned about the retaliation resulting from the tariffs announced,” she said.
It is unclear at the moment when China’s tariffs will come into effect or how long they may last.
US-EU spat
Last month, the European Union said it was planning to impose tariffs on orange juice, bourbon, peanut butter and cranberries among other items if the US goes ahead with the levies on steel and aluminum.
When Trump announced the metal tariffs on China, he said the EU, among other markets, would not be affected – for now. This is being reviewed in May.
European commissioner for trade Cecilia Malmström said that the EU was finalizing its list of American exports that could face sanctions, including steel, industrial and agricultural products.
However, Malmström also said that the EU still hoped to avoid a full-blown trade war, despite the escalating rhetoric between the US and its main global trading partners.
What happens now, in light of escalating tensions between the US and China – America’s second largest trading partner after the EU – is in the spotlight.
FoodIngredientsFirst has requested an up-to-date position from the EU. We have also requested comment from the privately-owned Chinese meat and food processing company, WH Group (formerly known as Shuanghui Group).
Chair of European Parliament’s International Trade Committee Bernd Lange said earlier in March: “A temporary exemption from the US punitive tariffs on steel and aluminum is important to protect the workers in the steel industry, but it can only be a small first step in the direction of respect of the rule of law.”
“An exemption for a couple of countries does not make Trump's measures more legitimate. I expect from President Trump to fight unfair trade in the World Trade Organization and the G20 Global Forum on Steel Excess Capacity, but not through unilateral measures.”
US-China partnership lays the groundwork for dairy export growth
On a much more positive note, Jiangnan University and the US Dairy Export Council (USDEC) have teamed up to pave the way for US dairy export growth in China – the world’s largest dairy export growth opportunity, projected to grow 44 percent in the next five years.
Jiangnan University’s Vice President Xu Yan and USDEC President and Chief Executive Officer Tom Vilsack signed a memorandum of understanding (MOU) formalizing the relationship on March 30 on Jiangnan University’s campus in Wuxi.
Council President and CEO Tom Vilsack celebrate a March 30 memorandum
of understanding to establish a new innovation partnership.
“We are very pleased to establish the US-China Dairy Innovation Center at our university together with USDEC,” said Xu. “The center aims to facilitate research innovation and technical services for the dairy and food industries and also strengthen education cooperation and research collaboration in dairy science and technology between our two countries.”
USDEC expects the MOU will deliver three major benefits:
- Encourage the development of innovative, China-friendly product formulations that incorporate US dairy ingredients, particularly whey and milk proteins and skim milk powder.
- Enable US dairy suppliers to be more engaged with and responsive to China’s food industry through access to in-market facilities and opportunities for jointly pursuing innovation projects that leverage US dairy ingredient functionality, versatility and nutrition.
- Enrich students’ academic experiences in Jiangnan University’s dairy science and technology programs with practical hands-on R&D skills using US dairy to jumpstart careers upon graduation.
“This MOU is further evidence of the US industry’s desire to elevate its presence and demonstrate its commitment to meet the needs and desires of Chinese customers and consumers with sustainably produced US dairy products,” added Vilsack.
The agreement follows a series of USDEC-led efforts aimed at building relationships in China and removing barriers to trade to level the playing field with competitors, including last year’s MOU on US dairy plant registration and the unilateral reduction in Chinese cheese tariffs.
“They are all part of USDEC’s broader global marketing strategy to expand people, partnerships and promotions in key markets and drive growth toward 'The Next 5 Percent',” added Vilsack.
The Next 5 percent is the industry-wide effort launched in 2017 to increase annual US dairy exports from the equivalent of about 15 percent of US milk solids to 20 percent.
Following the MOU signing, Vilsack addressed 150 food science majors at Jiangnan University. His presentation, “The Importance of Climate Smart Agriculture to Meeting World Food Needs,” explored the need for collaboration and innovation in tackling agricultural sustainability as the world’s resources grow increasingly strained.
The USDEC has confirmed to FoodIngredientsFirst that the announced Chinese sanctions will have no impact on this collaboration or dairy exports to China.
By Gaynor Selby
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