China is threatening to retaliate once again against rising U.S. tariffs, but the Asian country has literally run out of U.S. exports to put new taxes on. China is already slated to start charging a 25 percent tariff on U.S. soybeans, wheat and corn on July 6, but additional retaliation could reach wider, hitting U.S. companies in China like food and feed giant Cargill.
President Donald Trump, angered that China last Friday matched his threat of $50 billion in tariffs, vowed Monday night that the U.S. would tack on tariffs for an additional $200 billion worth of Chinese goods. If China retaliated again, Trump warned, he would add tariffs to another $200 billion of imports from the country, bringing the total to $450 billion.
The U.S. imports about $505 billion worth of Chinese products; China only buys about $130 billion of U.S. goods – much of it agricultural commodities.
But China is intent on matching the U.S. in the burgeoning trade war, and the U.S. ag and food sectors could be in store for more pain than the 25 percent tariff the Chinese are threatening to put on soybeans and corn.
To retaliate against the new threat of $200 billion in U.S. tariffs, China would have no choice but to retaliate again by “combining quantitative and qualitative” sanctions on the U.S., according to a spokesperson for the Chinese Ministry of Commerce (MOFCOM). And that would likely mean going after U.S. companies operating in China.
"The trade war waged by the United States is against both the law of the market and the development trend of today' s world,” said the MOFCOM spokesperson, who was quoted by the government-run Xinhua News. “It undermines the interests of the Chinese and American people, the interests of companies and the interests of the people all over the world."
One U.S. company with a lot to lose is Cargill, the ag giant with 50 business locations and more than 10,000 employees in China to man its operations that produce meat, edible oils, sweeteners, livestock feed and distribute grains and oilseeds.
An “all-out trade war” is something the company says it hopes to avoid.
“The impact of trade conflict between the world’s two largest economies will lead to serious consequences for economic growth and job creation and hurt those that are most vulnerable across the globe,” said Cargill Vice President for Global Corporate Affairs Devry Boughner Vorwerk.
And Cargill is particularly vulnerable because of the company’s continued efforts to expand in the most populous country in the world with a swiftly growing middle class.
Last year Cargill sold oilseed facilities in Europe and its share of a flour mill in Australia, but opened a new oilseed processing plant in China. The company is also investing in poultry production as consumption in China skyrockets.
Fear of Chinese retaliation is also growing in the fast food restaurant sector, where American chains doing business in China are wearing a red white and blue target, according to an industry official who asked not to be named because of the sensitivity of the situation.
If China does follow through with the “qualitative” type of retaliation it’s threatening against U.S. businesses abroad, the U.S. will be swift to levy the additional tariffs on $200 billion worth of Chinese products, White House trade advisor Peter Navarro told reporters Tuesday.
“If China … takes any actions to harm our companies operating in China or otherwise tries to harm any corporate entity – farmer, rancher, whatever – those constitute actions which are unacceptable as well,” Navarro said.
Those kinds of statements coming from the Trump administration are not comforting farm state lawmakers and agriculture groups who are bracing for July 6, the day when China is slated to impose its first tranche of 25 percent tariffs on soybeans, wheat and corn.
“No one in China will be hurt if the retaliatory U.S. wheat tariff is implemented,” the U.S. Wheat Associates and National Association of Wheat Growers said in a statement. “China has huge amounts of stored wheat and they can purchase what they need from Australia, Canada or even Kazakhstan, although Chinese consumers will miss the opportunity to experience higher quality products made from U.S. wheat. Instead, the outcome is likely to further erode the incomes of farm families who strongly support addressing the real concerns about China’s trade policies.”
Trump, Ag Secretary Sonny Perdue and others in the administration have called farmers patriotic often in recent weeks for saying they understand the White House’s crusade to reform China’s ways and reduce the U.S. trade deficit.
That understanding only goes so far, though, Republican and Democratic lawmakers said.
“With China vowing to retaliate, farmers, ranchers and rural communities stand to lose the most,” said Sen. Joni Ernst, R-Iowa. “And while I recognize and support President Trump’s desire to hold China accountable – this should not be done at the expense of rural America.”
Democratic Sen. Heidi Heitkamp said her North Dakota constituents are giving her an earful.
“This administration is playing chicken with China, creating a trade war at farmers’ expense, which is bad news for their bottom lines and our economy, plain and simple,” Heitkamp said. “North Dakota’s economy relies heavily on exports, and we’re proud to supply the world with food, energy, and manufactured goods. From soybeans to farm equipment to oil, these tariffs threaten to strike at the heart of our job-sustaining industries.”
But Navarro insists that China has more to lose than the U.S. in this fight and Trump will not back down until China both agrees to systemic changes that reduce tariff and non-tariff trade barriers as well as stop the theft of intellectual property in the U.S.
As to whether there’s still time for the U.S. and China to work out a deal that would avoid the tariffs and retaliation, Navarro was non-committal.
“Our phone lines are open,” he said.
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