China Targets US Agriculture as Trade War Intensifies

A flurry of developments over the past several days in the ongoing US-China trade war have caused further escalation of tensions between the two countries and the trade war to hit a new fever pitch.

On August 23, China announced that it would be levying additional tariffs of 5% and 10% on 801 and 916 items, respectively, worth roughly $75 billion in total. According to the Customs Tariff Commission of China’s State Council, these tariffs were being imposed in retaliation for the 10% tariff on $300 billion of Chinese goods announced earlier in August, which the Commission says have “led to the continuous escalation of Sino-US economic and trade frictions…and seriously threatened the multilateral trading system and the principle of free trade.”

Agricultural products will be the most affected by these additional tariffs, as the additional 10% tariff will apply to all fresh vegetables under HS Code 07 (onions, garlic, lettuce, carrots, etc.) and all nuts and fruits under HS Code 08 (cherries, apples, oranges, lemons table grapes, pistachios, almonds, etc.). Other affected products under the 10% tariff increase include soybeans, seafood, fruit and vegetable juices, sorghum, corn, wheat, meat and various meat products, and other such categories. Goods subject to the 5% tariff increase include beans, canned fruits and vegetables, peanuts, American ginseng, orange juice, and other products. China also announced on August 23 that it would be adding a 25% tariff on US cars and a 5% tariff on US auto parts, starting December 15.

In response, the United States announced the same day that it would be increasing tariffs on roughly $250 billion of Chinese imports from 25% to 30%, effective October 1, and on $300 billion of Chinese imports from 10% to 15%.

US President Donald Trump also issued a directive on Twitter that “American companies are hereby ordered to immediately start looking for an alternative to China.” This represents a significant ratcheting up of rhetoric and sparked significant backlash from American companies, the business community, and even caused anxiety within Trump’s own Republican Party itself. The legal basis for this directive is questionable – the International Emergency Economic Powers Act which President Trump has been using to justify the imposition of tariffs on China does not empower the President to pull investment out of a country or to demand American companies leave a certain country without declaring a national emergency for trade reasons, which itself would be unprecedented.

Adding to the confusion, President Trump seemed to backtrack on August 25, telling the media that he was having “second thoughts” about the latest round of China tariffs. However, this was contradicted by a statement soon issued by the White House which clarified that the only ‘second thoughts’ President Trump was having was about not raising tariffs higher. And on August 27, at the tail end of the G7 Summit in France, President Trump claimed China had made multiple phone calls to his trade team to try and restart trade talks, which a Chinese Foreign Ministry spokesman refuted, and President Trump and his officials refused to substantiate.

Through all of this, the impact on American agricultural exports to China cannot be understated. China has fallen from first to third largest market for American agricultural products and is expected to further fall to fifth by the end of the year. US fresh fruit exports to China for 2019 are down significantly compared to 2018, which itself was a steep decline from the previous year. As of July 2019, US orange exports to China were valued at $37.0 million, a decline of 55.7% compared to the previous year. Apples have fallen 23.1% to $15.2 million, cherry exports totaled $14.2 million, down 67.6%, and table grapes plummeted nearly 80% to merely $515,000. Walnuts also fell 49.2% to $9.3 million, but surprisingly other US nut exports have increased, including pistachios, up 63.6% to $170.0 million, and almonds, up 10.1% to $51.5 million.

Despite the losses piling up on both sides, there seems to be no end in sight to the ongoing trade war for weary consumers on both sides of the ocean.

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