Thursday , February 21 2019

Trade war hits US as China targets farms


China’s response to US tariffs aims to hit the Trump administration right in its natural resources.
The world’s largest commodities consumer said it will levy a first round of tariffs on $34 billion worth of US agriculture products, as well as automobiles, starting from July 6. Another $16 billion in goods, including coal and oil, will be subject to tariffs later.
The escalating dispute sent the prices of everything from soybeans to copper lower and hit the shares of US coal producers while boosting the prospects for alternative suppliers like Brazil.
By focussing on agriculture and energy, the tariffs target rural communities in states that voted for Trump in 2016. Beijing’s announcement came less than 12 hours after the US released its list of $50 billion worth of Chinese products subject to tariffs.
As recently as May, the Asian nation said it would seek to buy more US agricultural and energy products as part of a tentative trade truce between the two countries.
Farm commodities have been a key battleground in the trade war between the world’s two biggest economies. In April, the Asian nation started levying additional taxes on American fruit, nuts, pork and wine in response to Trump tariffs on steel and aluminum. Products affected include soy, corn, wheat, rice, sorghum, beef, pork, poultry, fish, dairy products, nuts and vegetables.
The list covers almost all farm products imported from the US, said Li Qiang, chief analyst with Shanghai JC Intelligence Co. Ltd. “Given China’s big trade surplus with the US, it will be more difficult and complicated for China” in the future to retaliate if Washington expands the tariff to cover more products, said Li. The new list includes more agricultural
produce, including dairy and seafood, than its initial list.
In 2017, China’s agriculture imports from US were worth $24.1 billion, the People’s Daily reported on May 24, citing customs data. That’s about 19 percent of total farm imports worth $125.86 billion, according to Ministry of Agriculture and Rural Affairs data.
The coal tariffs strike at the heart of Trump’s energy agenda. Since he was elected, the president has been trying to make good on a campaign promise to revive America’s coal industry. They also come as US miners have grown increasingly dependent on foreign markets for growth. US coal exports jumped by 61 percent in 2017 as shipments to Asia more than doubled.
A few weeks ago, China was looking at buying more from the US. While it’s pursuing a long-term goal of using less coal, the country still produces, consumes and imports more than any other nation. It purchased 271 million metric tons from overseas last year, according to customs data. The US exported about 3.2 million short tons to China, data from the Energy Information Administration show.
The total value of US coal exported to China last year was about $395 million, based on an average price of $122 per ton, according to Bloomberg Intelligence.
China has been a key recipient of American oil since a 40-year US ban on exports was ended by then-President Barack Obama in 2015. The Asian nation is helping drive a surge in exports from the US — China imported 18.4 million barrels of American crude and oil products in March, making it the third-biggest customer behind Mexico and Canada.
For China, the biggest importer of oil in the world, US crude is just a small part of its portfolio, with major suppliers like Saudi Arabia and Russia having the biggest shares. China spent $162.3 billion on crude purchases in 2017, with just $3.16 billion of that going to the US.
China also said it would place tariffs on imports of natural gas, but its list only specifies the fuel in gaseous form, not the liquefied natural gas that it currently imports by ship from the US. China is the third-largest buyer of US LNG, after Mexico and South Korea. Record production from America’s shale plays has allowed the US to become a net exporter of the fuel for the first time since the 1950s.
The Asian nation is set to become the world’s largest importer of LNG in the next decade, and several proposed US export projects are seeking long-term buyers to finance construction.
Bloomberg New Energy Finance forecasts China’s imports will grow to 82 million tons a year by 2030, but the country has long-term contracts to supply just 42.5 million tons by then.

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