Trade war flares up
Why China Strikes Back With Pork
The Sino-US trade war continues to heat up. In response to tariffs imposed by the United States (US) on steel and aluminum, China is now imposing tariffs on 128 US imports, including pork. Why does China specifically pick pork?
The value of the Chinese sanctions amounts to about $3 billion, with tariffs (including on American nuts, wine and pork) as high as 25%. The Chinese sanctions came into effect on Monday, April 2. With the tariffs, China is violating World Trade Organization (WTO) rules. However, according to the Chinese Ministry of Finance, China is fully within its rights, given that the US has provoked this reaction.
US pig exports in trouble
Due to the import duties on pork, the American pig sector is suddenly in serious trouble without being asked. It is logical to explain why China specifically singles out American pork. China is (after Mexico) the second largest market for US pork (495.637 tons in 2017); with an export value of $1,08 billion.
China is particularly important for the sale of by-products (pork fat). important market; worth over $6 per pig slaughtered. This means that the Chinese levy will hit American pig exports hard. This turns out to be unfortunate; once more because the pig price is already under pressure.
The USMEF (the American agency for meat exports) says it is disappointed with the Chinese measure. Unlimited market access is crucial for the profitability of the American pig sector, as more than 25% of the production is sold on the world market. They therefore hope for a speedy solution to the conflict.
Pork big commodity
From a Chinese point of view, the pork levy does not come out of the blue. As a result of an increasing supply, the Chinese pig price at the lowest point in years in early April, putting local producers in trouble. Pork is one of the main commodities in China, and thus an important pillar for the economy. The tariff on American pork could prop up or even boost Chinese pig prices.
Despite the fact that China initially also threatened a tax on soybeans, it is not on the list. A tax on soybeans could affect US exports, but China itself is dependent on US imports. A levy would then return like a boomerang, with which China cut itself in the fingers. There may be a tax on soybeans at a later stage; China has indicated that it wants to start with moderate reactions.
Fear of more
According to Reuters news agency, the trade war is likely to flare up even further this week; US President Donald Trump is said to be considering countermeasures (to prevent the misuse of US patents) worth no less than $50 billion. Whether Trump will put his words into action remains to be seen. Initially Trump would also come up with tariffs for European steel; later the president decided against it.
Wouter Job
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