China’s Ministry of Commerce (MOFCOM) announced on Monday (August 5) that Chinese companies have suspended the purchase of US agricultural products and that the Customs Tariff Commission of the State Council is not ruling out new import tariffs on products purchased after August 3.
The change in practice came several days after US President Donald Trump said that the US would add a 10% tariff on the remaining $300bn in goods imported from China. That tariff is set to start on September 1 and will not include the $250bn in products that already had a tariff applied.
MOFCOM said that adding the proposed tariff was not “conducive” to solving the problems between the two countries. The agency also said China would “take necessary countermeasures” if those tariffs were put in place.
Representatives of the two countries had meetings to discuss the ongoing trade situation on July 30 and 31.
Tariff background
China imposed tariffs on several US agricultural products, including feed ingredients like soybeans, in August 2018 following the start of US tariffs on Chinese products.
China has been the largest market for some US feed crops like soybeans, where the market accounted for about 61.3% of all US soybean exports in 2016/17, according to information from the US Department of Agriculture (USDA). In 2017/18 China imported about 49% of US soybean exports.
It was also the largest export market for feed grains like sorghum, said the US Grains Council. In the 2017/18 marketing year, China imported about 4.2m metric tons of the grain.
Several feed ingredient producer organizations have been calling for a resolution to the export market disruption.
“Sales to China in the short term and a comprehensive deal for the long term are critical to the health of the US grains sector,” the US Grains Council (USGC) told FeedNavigator in response to Monday’s announcement. “We continue to encourage all parties to find practical solutions to resume US agricultural and food sector sales.”
The American Farm Bureau Federation added that the news was a “body blow” to agricultural producers.
“In the last 18 months alone, farm and ranch families have dealt with plunging commodity prices, awful weather and tariffs higher than we have seen in decades,” said Zippy Duvall, Farm Bureau president. “Farm Bureau economists tell us exports to China were down by $1.3bn during the first half of the year.”
“Now, we stand to lose all of what was a $9.1bn market in 2018, which was down sharply from the $19.5bn US farmers exported to China in 2017,” he said.
The halt in sales follows the release of details regarding the second round of federal financial support provided to US producers of agricultural products including feed grains and ingredients. The supports were developed to address the loss in export markets from ongoing trade uncertainty.
Canola cull
US producers are not the only ones to face a stop in trade with China.
Earlier this year, China ended imports of canola from Canada and suspended the licenses of two Canadian exporting companies – Richardson International Limited and Viterra Inc.
China was Canada largest export market for canola at the time.