China hits US farm goods with tariffs as trade war escalates

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China has introduced retaliatory tariffs on about $22bn of US goods, including agricultural exports, targeting President Donald Trump’s rural base in the latest escalation in the trade war between the world’s two largest economies.

Beijing’s measures, which were announced last week in response to Trump slapping an additional 10 per cent levy on all Chinese products, are aimed primarily at US farm goods.

Soyabeans, one of the largest US exports to China and worth $12bn last year, were hit with an additional 10 per cent duty, as were pork, beef and seafood. Cotton, chicken and corn face added 15 per cent levies.

The vast majority of US agricultural exports to China are now subject to added tariffs that will erode their competitiveness in the Chinese market.

Analysts at Nomura estimated that China’s added 10 per cent tariff covers nearly $19bn of US imports, with $3bn of goods receiving an additional 15 per cent levy. Altogether China’s list includes 740 items.

Beijing last week also suspended imports of US timber, citing pest concerns such as recent detections of bark beetles and longhorn beetles. US exporters sent about $850mn worth of timber logs to China last year.

Ting Lu, chief China economist at Nomura, said Beijing’s response was “relatively measured compared with the actions from the US”.

He estimated that the hit to US farmers would be limited in the near term as it would take time for other countries to increase production of soyabeans and other agricultural products in volumes that could replace the US harvest.

Beijing’s latest salvo followed a previous exchange in February, when China targeted US energy exports and cars after Trump announced an initial 10 per cent tariff on top of existing levies. Citigroup analysts estimated that those tariffs covered about $14bn of US goods.

An economics professor in Beijing, who asked not to be named, said China’s response indicated restraint in an effort to preserve room for a negotiated solution. “The targeted agricultural products come from red states, which seems to be an attempt to put some political pressure on Trump,” he said.

While Trump has acknowledged that tariffs will cause “a little disturbance”, he told US farmers on social media last week to “start making a lot of agricultural product to be sold INSIDE of the United States”, adding: “Have fun!”

Experts — as well as US farmers — are beginning to fear that the countries are headed towards a damaging repeat of the US-China trade war during Trump’s first term. The 2018 tariff fight led to $27bn in losses for US agriculture, though farms received as much as $23bn in compensation from the federal government for trade disruptions.

US grain prices have already tumbled in recent weeks as tariffs exchanges with China as well as the US and Mexico threatened to disrupt trade flows.

Over the weekend, Trump declined to rule out that his policies could cause a recession in the US.

Frederic Neumann, chief Asia economist at HSBC, said the tit-for-tat trade measures between the US and China would raise prices, particularly for American consumers.

“We shouldn’t forget in all of this that there’s not just a Chinese growth impact, there’s also a non-linear impact on US inflation,” he said. “US consumers will have to, for a while, at least, swallow higher prices.”

Aside from tariffs, Beijing has banned US biotech company Illumina from exporting its gene-sequencing equipment to China and added Calvin Klein parent PVH Corp to a trade blacklist, which could make it subject to a range of sanctions.

It has also cut off a growing number of US defence groups from accessing components and materials made in China.

“We’re moving somewhat beyond the tariff war to a broader, more expanded friction in the economic relationship,” said Neumann.

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