US tariffs take effect, China retaliates

BEIJING (AP)—The United States hiked tariffs on Chinese imports July 6 and Beijing said it immediately retaliated in a dispute between the world’s two biggest economies that President Donald Trump says he is prepared to escalate.

Washington increased tariffs at 12:01 a.m. Eastern time on $34 billion worth of Chinese imports, a first step in what could become an accelerating series of tariffs.

A Chinese foreign ministry spokesman, Hu Chunhua, said retaliatory measures “took effect immediately.” Hu gave no details, but Beijing earlier said it would match the U.S. action by targeting $34 billion of American goods including soybeans, pork and electric cars for higher duties.

Companies worry the spiraling dispute could chill global economic growth, but financial markets took the developments in stride.

The day prior, Trump told reporters who flew with him to Montana for a campaign rally that higher tariffs on an additional $16 billion in Chinese goods are set to take effect in two weeks.

After that, the hostilities could intensify: Trump said the U.S. is ready to target an additional $200 billion in Chinese imports—and then $300 billion more—if Beijing does not yield to U.S. demands and continues to retaliate.

That would bring the total of targeted Chinese goods to potentially $550 billion—more than the $506 billion in goods that China shipped to the United States last year.

The Trump administration contends China has deployed predatory tactics in a push to overtake U.S. technological dominance. These tactics include cyber-theft and requiring American companies to hand over technology in exchange for access to China’s market.

Chinese officials reject accusations of theft and say no foreign company is obligated to share technology. But rules on auto manufacturing and other industries require companies to work through state-owned partners, which forces them to share know-how with potential competitors.

“The United States has blatantly violated WTO rules,” said Hu, the foreign ministry spokesman. “Any unilateral pressure will be futile.”

Washington has strained relations with potential allies in its dispute with Beijing by raising import duties on steel, aluminum and autos from Europe, Canada, Mexico and Japan.

Trump’s confrontational outlook applies to other trading partners as well as China, said Tai Hui, chief strategist for JP Morgan Asset Management, in a report.

“This is a potential concern for the outlook of corporate investment and consumption around world,” said Hui.

The official China Daily newspaper accused the Trump administration of “behaving like a gang of hoodlums” who would damage the global economy unless other countries stop them.

“There should be no doubting Beijing’s resolve,” the newspaper said.

The American Chamber of Commerce in China appealed to both sides to negotiate a settlement.

“There are no winners in a trade war,” the chamber’s chairman, William Zarit, said in a statement. It said American companies want fairer treatment but will be hurt by U.S.-Chinese tensions.

“We urge the two governments to come back to the negotiation table,” Zarit said.

Ag is angry

Several agriculture groups announced their anger on the move.

The American Soybean Association issued a statement, saying a soft farm market, already-declining prices, and now, China’s retaliation against President Trump’s 25 percent tariffs on $34 billion worth of Chinese goods, which took effect at midnight last night. Soybean farmers, whose crop represents 41 percent of the value of products on China’s tariff list, will feel the full effect.

The value of U.S. soybean exports to China has grown 26-fold in 10 years, from $414 million in 1996 to $14 billion in 2017. Since talk of the tariffs began back in March, U.S. soy prices have dropped more than $2.00 per bushel.

“Soybeans are the top agriculture export for the United States, and China is the top market for purchasing those exports,” John Heisdorffer, a soybean grower from Keota, Iowa, and president of the American Soybean Association, said. “The math is simple. You tax soybean exports at 25 percent, and you have serious damage to U.S. farmers.”

An ASA release said soy growers rely heavily on exports to China: In 2017, China imported 31 percent of U.S. production, equal to 60 percent of total U.S exports and nearly 1 in every 3 rows of harvested beans. Over the next 10 years, Chinese demand for soybeans is expected to account for most of the growth in global soybean trade, which underscores the importance of this market for future U.S. soybean sales.

“When the possibility of tariffs first arose, ASA asked President Trump to consider other policies for reducing the U.S. trade deficit with China. Then ASA organized a fly-in to urge Congress to encourage the administration to rethink the tariffs. Finally, in a last-ditch social media effort earlier this week, individual soybean farmers who will be directly affected by the trade conflict attached their photographs to statements appealing directly to the president and his advisors,” the ASA statement read.

The National Pork Producers Association also issued a statement, indicating U.S. pork producers now face punitive tariffs of 62 percent on exports to China, a market that represented 17 percent of total U.S. exports by value in 2017.

“China announced a new 25 percent tariff in response to U.S. action under Section 301 of the Trade Act of 1974. That tariff is on top of the 25 percent punitive duty levied by China in early April in response to U.S. action under Section 232 of The Trade Expansion Act of 1962. U.S. pork already had a 12 percent tariff on exports to China. The country also has a 13 percent value-added tax on most agricultural imports,” the NPPC statement said.

“Combined with Mexico, which also placed a punitive tariff on U.S. pork it was 10 percent from June 5 until yesterday, when it rose to 20 percent 40 percent of total American pork exports now are under retaliatory tariffs, threatening the livelihoods of thousands of U.S. pig farmers.”

Iowa State University economists calculated that from early March, when rumors of China’s initial retaliatory tariff were circulating, through May producers lost $18 per hog, or more than $2 billion on an annualized basis.

“We now face large financial losses and contraction because of escalating trade disputes. That means less income for pork producers and, ultimately, some of them going out of business,” said Jim Heimerl, president of the National Pork Producers Council and a hog farmer from Johnstown, Ohio.

“America’s pig farmers and their families are patriots who are demonstrating enormous commitment to the greater good of our country as they shoulder a disproportionate share of trade retaliation against the United States. We need these trade disputes to end.”

Americans for Farmers & Families spokesman Casey Guernsey said, “China dealt its latest blow to American agriculture today with threats of even more tariffs on the horizon. Following Canada’s tariffs on U.S. products earlier this week, America’s farmers and families are staring down a dark path with no signs of relief in sight.

“For those questioning whether or not retaliation hurts our workers, consumers and job creators, look no further than the front page of your local newspaper. In neighborhoods across the country, people are rightly sounding the alarm—not just for America’s food and agriculture, but for every sector of our economy. History has shown punitive tariffs only lead to fewer opportunities—opportunities we cannot afford to lose.

“With the lowest farm income in 16 years and our largest markets for agriculture products now reducing their imports and purchasing goods from our competitors, we are counting on the administration and Congress to reach a resolution on responsible trade policies – before we’re forced to shut down our operations for good.”

In a joint release, the National Association of Wheat Growers and U.S. Wheat Associates said, “From March to June over the past three years, Chinese flour milling companies and their importers purchased an average of about 20 million bushels of U.S. wheat, returning well over $145 million to American farm families and grain handlers. Not in 2018, however. Unable to accept the risk of escalating import prices, Chinese customers stopped making new purchases of U.S. wheat last March, after the Chinese government threaten a 25 percent import tariff on U.S. wheat in retaliation to the threat of U.S. tariffs on Chinese imports.

“Today, damage to the livelihood of America’s hard-working farm families is no longer just a threat. The exchange of punitive tariffs between Washington and Beijing today represents the next phase of what could be a long and difficult struggle that will likely inflict more pain before we reach an unknown resolution.

“U.S. Wheat Associates, the National Association of Wheat Growers, and the growers we represent reaffirm our position that unfair Chinese government policies create unnecessary trade distortions that hurt U.S. farmers and other industries. We urged the U.S. government to challenge China’s domestic price support and tariff rate quota compliance that led to cases disputing these policies within the World Trade Organization. These cases served notice to China and our trading partners that the United States was willing to lead a legitimate effort to enforce existing trade rules—by following those rules.

“China did not stop importing U.S. wheat in response to these cases, in part because Chinese demand for our high-quality wheat crops is rapidly growing. The unilateral decision to impose tariffs, however, has already had a direct, damaging effect on U.S. wheat growers.

“Wheat growers can only hope that the United States and China will stop trading salvos and we call on both governments to come to a resolution quickly. Farmers are eager to move past this dispute and start trading wheat and other agricultural products again soon.”

Senior field editor Larry Dreiling contributed to this report.