China Excludes Essential Food Products from Tariff Increase on US Goods

May 13, 2019 Updated: May 13, 2019

China announced on May 13 that it would increase tariffs ranging from 5 to 25 percent on 5,140 U.S. products, worth about $60 billion, as retaliation for a recent U.S. tariff hike on $200 billion of Chinese goods.

Beijing said the new rates would be effective June 1.

Major U.S. agricultural products such as fresh pork, soybeans, wheat, and sorghum that make up the bulk of U.S. exports to China aren’t included on this new list. Most of the products with added duties are electronic products. Microwaves, printers, and telecommunication equipment are among those with the highest tariff rates.

With China’s domestic food supply encountering shortfalls, the Chinese regime is likely to continue importing U.S. food products despite the self-imposed tariffs.

Reignite the Trade War

Two hours after U.S. President Donald Trump urged in a Twitter post that China should refrain from retaliating, Beijing announced the new tariffs.

Trump had warned: “There will be nobody left in China to do business with. Very bad for China, very good for USA!… Therefore, China should not retaliate-will only get worse!”

On May 13 afternoon, Trump said he would meet with Chinese leader Xi Jinping at the G20 summit in Japan in late June, adding that he expects discussions would be “very fruitful.”

China’s State Council, a cabinet-like agency, announced through its Customs Tariff Commission Office the full tariff list, which divides the 5,140 U.S. goods into four categories.

Back in September 2018, after the U.S. administration imposed 10 percent tariffs on $200 billion of Chinese goods, China’s Ministry of Commerce had announced retaliatory tariffs on these same four categories of products, but with 10 percent tariffs on the first and second categories, and five percent tariffs on the third and fourth categories.

The first category will be charged 25 percent duties, a long list of items ranging from food products such as fresh and frozen sheep meat with bones, processed beef, several types of processed grains, processed pig hind legs, coffee, sugar, and beer—to everyday consumer products such as clothing, household appliances, and cameras.

The second category, with 20 percent tariffs, includes processed fruit, computers, radar, sports equipment, fitness products, and so on.

The third category, with 10 percent tariffs, includes processed vegetables, chicken breast, musical instruments, and diapers.

The fourth category, with 5 percent tariffs, covers occupational equipment such as tractors, fire trucks, and hospital equipment and materials.

Security of Domestic Food Supply

Notably, the newly announced tariffs do not include essential foods that many people in China consume, such as the staple cereals of wheat and rice, and the most consumed meat, pork. But the Chinese regime does have other tariffs already imposed on these U.S. export items.

This is likely due to the fact that domestic production of such essential food products is not sufficient.

China’s wheat harvest did not look rosy in 2018, at 15 percent less than in 2017.

According to China’s National Bureau of Statistics, the total land used for wheat production in 2018 was 24.268 million hectares, which is one percent less than in 2017. Due to droughts, the crop yield in 2018 was 131 million metric tons, 15 percent less than in 2017.

China’s Food and Strategic Reserves Administration said in April that the area for wheat production in 2019 will be similar to 2018. But this year, crops are being threatened by the presence of a crop disease: fusarium head blight (FHB).

China’s Ministry of Agriculture and Rural Affairs released their latest survey data on May 5, in which it estimated that FHB would impact 10 million hectares’ of wheat, which is the worst in the past three years.

The agriculture ministry added that the FHB can reduce production by 50 percent. If unhealthy wheat is harvested and consumed by human beings or livestock, it can pose health risks.

The Chinese regime imposed 25 percent tariffs on U.S. wheat back in April 2018. Even with these added tariffs, U.S. wheat is still cheaper than Chinese wheat in China.

Sina, a Chinese news portal, reported on May 9 that U.S. wheat is 230 yuan ($33.44) per metric ton, cheaper than local wheat, as of the end of April.

The report remarked that the Beijing government should cancel existing tariffs on U.S. wheat to benefit Chinese consumers.

Beijing had also placed tariffs on U.S. pork, of 62 percent, in April 2018. Chinese importers did not import U.S. pork for the first six months. But in November, they began to import.

That’s because the country is currently plagued by the African swine fever, which is a contagious disease fatal to pigs, though not harmful to humans who consume such pork. Large populations of pigs have either died, fallen sick, or been culled to prevent further spread of the disease.

The agriculture ministry said in an April 23 press conference that the number of live pigs and fertile sows have decreased dramatically in the first three months of 2019—the largest drop in the past 10 years.

Pork prices in China have gone up as a result of the unbalanced supply and demand.

“It’s kind of like, why do you buy from your enemy? Because you have to,” Don Roose, president of the Iowa-based broker U.S. Commodities, told Reuters.

“This is a game changer,” Dennis Smith, a senior account executive at Archer Financial Services Inc., told Bloomberg. “It gives confirmation that the disease [African swine fever] is far worse than what we’ve been told.”

China reported its first ASF outbreak in August 2018. On April 19, authorities confirmed that the disease had spread to all provinces and regions of China.

China had no choice but to import pork from the United States, while paying the added tariffs.

Bloomberg quoted anonymous sources on March 26 who said China may import 300,000 metric tons of U.S. pork this year, which is 81 percent higher than the amount China had imported in 2017.