China imposes retaliatory tariffs in US dairy sector

The American dairy industry has been counting the cost of the latest round of tariffs that will be imposed on its exports to China, in the latest round of the ongoing trade war between Beijing and the US administration of President Donald Trump.

The State Council Tariff Commission of China has announced (Friday Aug 23) that it would from September 1 and December 15 impose 10% and 5% additional duties on a wide range of American exports (both rates being applied to different products on both days) – with Chinese government documents clarifying the wide range of products affected.

The Chinese commission released two lists of tariffs – the September 1 schedule of duties – see here and the December 15 list – see here

The commission said this was a response to recent US government announcement of a 10% tariff on approximately USD300 billion’s worth of goods imported from China, also to be imposed on September 1 and December 15.

In a statement released in Beijing, it said: “The US measures have led to the continuous escalation of Sino-US economic and trade frictions, which have greatly harmed the interests of China, the United States and other countries, and have also seriously threatened the multilateral trading system and the principle of free trade.”

Most dairy products sold by the USA to China will be affected, from September 1 – opening potential market opportunities for European dairy exporters, especially as these duties augment tariffs already charged om American products.

The September 1 list notes that 5% duties will be charged on US-made cheese (including fresh, powdered and blue cheese), milk, cream, butter, buttermilk and curd. Also, on December 15, 5% duties will be imposed on US-made anhydrous lactose, and other lactose and lactose pulp; and 10% on US-made ice cream. American-made food products including dairy – for instance cookies – are also covered. These, for instance, attract a 10% Chinese duty from December 15.

American dairy exports to China have already been falling, as many have already been subject to retaliatory Chinese duties since last July (2018), when sugared and unsweetened milk and cream, buttermilk, whey, butter, cream sauce, solid milk products, yoghurt, and cheese were hit with 25% duties, to which the new 5% duties will be added.

In 2017, the USA exported USD61.8 million’s worth of cheese to China – that fell to USD57 million in 2018, according to international trade data. And US exports of powdered milk or cream to China fell from USD68 million in 2017 to USD40 million in 2018. European Union (EU) dairy exports to China have yet to benefit significantly, however, although EU cheese exports to China have risen slightly from USD98 million in 2017, to EUR100 million last year (2018). EU dairy industry association Eucolait noted on August 1 that June (2019) “EU whey exports to China [are] almost on par with last year thanks to the US-China trade war.”

American dairy sales to China have continued to fall, noted the USA Dairy Export Council, which said that first half 2019 sales to China for key products milk powders, cheese, butterfat, whey products and lactose were down 54% year-on-year, while sales to other markets were up 5%. Sales of cheese to China for this half were down 46% year-on-year, and whey exports to China were down 58% in the first half, a loss of more than 12,000 tons per month, said the council.

A note from Asian business advisors Dezan Shira & Associates said: “The new tariffs represent an overall total value of about 10% of all US-China bilateral trade, which …means that another USD75 billion…is about to have new or additional tariffs imposed upon them – a significant burden for US suppliers to China.”

The trade war has also been bad news for Chinese dairy exporters hoping to enter the US dairy market. The latest duties announced by the US Trade Representative (USTR) – which sparked the latest round of Chinese retaliation – include 10% tariffs on a wide range of dairy products. Those that come into force on September 1 are being levied on China-made milk, cream, powdered milk or cream, condensed milk, buttermilk, yoghurt, sour cream, butter, milk protein concentrates, and cheese, including fresh, powdered, processed and blue cheese. Chinese dairy exports to the USA, are, however, negligible.

Will the US-China trade war end any time soon, restoring export competitiveness to the American dairy sector? US President Donald Trump claimed at the G7 summit in Biarritz, France, on August 26, that serious talks with China over resolving the ongoing trade war with France are imminent. But the Chinese government said no date had been fixed for the resumption of talks – perhaps indicating that US weakness in the China dairy market may continue for the rest of this year least.

Related content

Leave a reply