China’s tariffs on US agricultural products take effect

Beijing began imposing tariffs Monday on many farm products from the United States, for which China is the largest overseas market. It is the latest escalation of a trade fight between the world’s two-largest economies.

The Chinese government announced the tariffs last week, shortly after President Donald Trump raised tariffs on Chinese products for the second time since he took office in January. The Chinese tariffs will include a levy of 15 per cent on US products like chicken, wheat and corn, as well as 10 per cent on products like soybeans, pork, beef and fruit.

Beijing said that goods that had already been shipped by Monday and imported by April 12 would not be subject to the new tariffs.

A spokesperson for the National People’s Congress, China’s annual legislative session, said last week that Trump’s latest tariffs had “disrupted the security and stability of the global industrial and supply chains.”

The Chinese government also said it was blocking 15 US companies from buying Chinese products unless it granted special permission, including a manufacturer of drones that supplies the US military. And it said it was blocking another 10 US companies from doing business in China.

Trump imposed a 10 per cent tariff on almost all imports from China in early February, and raised the tariff to 20 per cent last week. He has said the actions were intended partly to pressure China to reduce the flow of the opioid fentanyl into the United States.

Trump also imposed 25 per cent tariffs on Canada and Mexico last Tuesday, though he abruptly suspended many of those levies two days later.

He has added 20 per cent tariffs to the roughly $440 billion worth of Chinese goods that the United States imports annually. The average US tariff on affected Chinese goods now stands at 39 per cent, up from 3 per cent when Trump began his first term eight years ago. Other than China, Canada and Mexico, the United States collects tariffs averaging about 3 per cent on most countries.

Despite the recent escalations in the trade war between US and China, both sides have signaled that they may be open to a compromise. Last week, China’s commerce minister told reporters that he had invited his American counterpart and the US trade representative to a meeting. And last month, Trump said that a new trade deal with China was “possible.”

Monday’s levies are not the first time in recent weeks that China has responded in kind to Trump’s trade actions. After the president imposed 10 per cent tariffs in early February, China said it would place tariffs on natural gas, coal and farm equipment purchased from the United States.

But the United States has more targets in a trade war because Americans purchase far more goods from China than the Chinese purchase from Americans. This enabled the United States to one-up China relatively easily after China imposed reciprocal tariffs on US goods during Trump’s first term.

China is also hamstrung by a number of economic problems, including weak foreign investment and the aftermath of a real estate bust.

Still, China has other tools for managing the ongoing trade skirmish. In the past, it has cut taxes on Chinese companies that export goods to the United States, enabling them to lower prices and dampen the effects of a US tariff.

Chinese companies have also moved final assembly of their products to countries like Vietnam and Mexico, with which the United States has had relatively free trade relations in recent decades. But Trump has tried to tighten this loophole by threatening tariffs on Mexico.

And Chinese companies have sought to exploit the so-called de minimis rule, which exempts packages from tariffs if their value is $800 or less. Trump has tried to crack down on this practice, but the crackdown proved complicated to execute and Trump has largely paused the effort.