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China Responds to U.S. Aluminum and Steel Tariffs

China US Trade relations

On March 23, new tariffs on steel and aluminum imports into the U.S. went into effect. While they are being applied to all exporters of steel and aluminum, with a few exceptions, the clear target is China. As we outlined in the March 5, Market Intel article, China is far and away the largest producer of steel and aluminum in the world. Even though it doesn’t export much steel to the U.S., China does export a significant volume of aluminum. On April 2, China countered with tariffs aimed at more than 120 U.S. products.

The U.S. actions were taken under Section 232 of the Trade Expansion Act of 1962, which gives the executive branch the ability to conduct investigations to “determine the effects on the national security of imports.” This is critical because under the General Agreement on Tariffs and Trade Article XXI Security Exceptions, a country can unilaterally suspend trade benefits it extends to other countries if it deems that imports are posing a national security threat.
In response to the U.S. action, China notified the World Trade Organization on March 29 that it would begin suspending concessions, i.e. increasing tariffs, for some products from the United States because it did not believe our government was acting in the name of national security. Instead, China said the United States was increasing tariffs on steel and aluminum as a "safeguard" measure. The distinction is important because the procedures for taking action against a trade partner under the Safeguards Agreement are significantly different from those that may be taken if trade actions are taken under the National Security Exemption.  In its WTO notification, China charges that “the measures taken by the United States are not consistent with its obligations under the relevant provisions of the GATT 1994 and Safeguards Agreement.” China’s notification also included the list of U.S. products that, beginning April 2, would face higher tariffs when entering China to serve as partial compensation for the WTO rights upon which China believes the U.S. is infringing.
The retaliation list that China produced includes 128 HS-8 level tariff lines. Of those 128, 94 are agricultural in nature; the remainder are steel and aluminum. The agricultural lines are divided into two categories – 86 products that will be subject to an additional 15 percent tariff and eight products that will be subject to an additional 25 percent tariff. It is important to keep in mind these new tariffs are in addition to existing tariffs. For example, a Chinese importer of U.S. frozen pork (HS 02032900) had been paying a tariff of 12 percent before April 2; now she will pay a tariff of 37 percent on the same U.S. product, while competing against frozen pork products from our European Union, Canadian, Brazilian, Chilean and other international competitors subject to the regular 12 percent tariff. It doesn’t take much of a math or economic background to appreciate that the U.S. competitive position will quickly deteriorate in these conditions.
Further examination of the Chinese retaliation list is quite interesting. For some products, like pork, China is a critical market for the U.S. and the U.S., having a substantial market share, is a significant supplier of this product to China. But for many other items, China is neither a significant market for the U.S. nor does the U.S. supply a significant share of total Chinese imports. For a third subset the tariffs are indeed irrelevant. In fact, for 23 products – 42 percent of the list – the U.S. exported zero dollars in these products to China in 2017 and have never had a significant presence in the market. Further, only three of the top 10 agricultural products that the U.S. shipped to China in 2017 were on the list - pork ($663 million), tree nuts ($242 million) and fresh fruit ($225 million). Below, Figure 1 details the tariffs to be paid by Chinese importers of listed U.S. products. Figure 2 details the 2017 U.S. export value of each product on the list, as well the relative importance of the Chinese market to each U.S. product and the share of the Chinese market the U.S. captured in 2017.
Much debate can be had about why the list includes the products it does, but it is clear Chinese officials are sending a message. And there are suspicions they are paying attention not only to what the U.S. officials are saying in formal communication, but also monitoring informal communication channels like social and other media.

Veronica explains the issues further in this interview with RFD-TV.

Figure 1. Goods Covered and Tariff Levels
HS Code
Description
Pre-Retaliation Applied Tariff
Post-Retaliation Applied Tariff
Higher Than Pre-WTO Acccession Tariff?
02031200
Meat of Swine, Fresh or Chilled, Hams, Shoulders and Cuts Thereof, With Bone In
20
45
 
02031900
Meat of Swine, Fresh or Chilled, Other
20
45
 
02032190
Meat of Swine, Frozen, Carcasses and Half-carcasses, Other
12
37
Yes
02032200
Meat of Swine, Frozen, Hams, Shoulders and Cuts Thereof, With Bone In
12
37
Yes
02032900
Meat of Swine, Frozen, Other
12
37
Yes
02064100
Livers Of Swine, Edible, Frozen
20
45
 
02064900
Offal Of Swine Except Livers, Edible, Frozen
12
37
Yes
08011100
Coconuts, Desiccated
12
27
Yes
08011200
Coconuts in the inner shell (Endocarp)
12
27
Yes
08011990
Coconuts, Other
12
27
Yes
08012100
Brazil Nuts, Fresh Or Dried, In Shell
10
25
Yes
08012200
Brazil Nuts, Fresh Or Dried, Shelled
10
25
Yes
08013100
Cashew Nuts, Fresh Or Dried, In Shell
20
35
Yes
08013200
Cashew Nuts, Fresh Or Dried, Shelled
10
25
Yes
08021100
Almonds, Fresh Or Dried, In Shell
24
39
Yes
08021200
Almonds, Fresh Or Dried, Shelled
10
25
Yes
08022100
Hazelnuts Or Filberts (Corylus Spp.), Fresh Or Dried, In Shell
25
40
Yes
08022200
Hazelnuts Or Filberts (Corylus Spp.), Fresh Or Dried, Shelled
10
25
Yes
08023100
Walnuts, Fresh Or Dried, In Shell
25
40
Yes
08023200
Walnuts, Fresh Or Dried, Shelled
20
35
Yes
08024110
Chestnuts (Castanea Spp.), Fresh Or Dried, In shell
25
40
Yes
08024290
Chestnuts (Castanea Spp.), Fresh Or Dried, Shelled, Other
25
40
Yes
08025100
Pistachios, Fresh Or Dried, In Shell
10
25
 
08025200
Pistachios, Fresh Or Dried, Shelled
10
25
 
08026190
Macadamia Nuts In Shell, Other, Fresh Or Dried
24
39
Yes
08026200
Macadamia Nuts Shelled, Fresh Or Dried
24
39
Yes
08028000
Areca Nuts, Fresh Or Dried, Whether Or Not Shelled
10
25
Yes
08029030
Pine-nuts, Fresh Or Dried, Shelled
25
40
Yes
08029090
Other nuts, Fresh Or Dried
24
39
Yes
08031000
Plantains, Fresh Or Dried
10
25
Yes
08039000
Bananas, Other Than Plantains, Fresh Or Dried
10
25
Yes
08041000
Dates, Fresh Or Dried
15
30
 
08042000
Figs, Fresh Or Dried
30
45
 
08043000
Pineapples, Fresh Or Dried
12
27
Yes
08044000
Avocados, Fresh Or Dried
25
40
 
08045010
Guavas, Fresh Or Dried
15
30
Yes
08045020
Mangoes, Fresh Or Dried
15
30
Yes
08045030
Mangosteens, Fresh Or Dried
15
30
Yes
08051000
Oranges, Fresh Or Dried
11
26
 
08052190
Mandarins (Including Tangerines and Satsumas), Other, Fresh Or Dried
12
27
 
08052200
Clementines
12
27
 
08052900
Wilkings And Similar Citrus Hybrids
12
27
 
08054000
Grapefruit, Including Pomelos
12
27
 
08055000
Lemons (Citrus Limon, Citrus Limonum) and Limes (Citrus Aurantifolia)
11
26
 
08059000
Citrus Fruit, Other, Fresh Or Dried
30
45
Yes
08061000
Grapes, Fresh
13
28
 
08062000
Grapes, Dried
10
25
 
08071100
Watermelons, Fresh
25
40
Yes
08071910
Hami Melons, Fresh
12
27
Yes
08072000
Papaws (Papayas) Fresh
25
40
Yes
08081000
Apples, Fresh
10
25
Yes
08083010
Ya Pears, Hsueh Pears, Fresh
12
27
Yes
08083090
Pears, Other, Fresh
10
25
Yes
08092100
Sour Cherries (Prunus Cerasus), Fresh
10
25
Yes
08092900
Cherries, Fresh, Other Than Sour Cherries
10
25
Yes
08093000
Peaches, Including Nectarines, Fresh
10
25
Yes
08094000
Plums And Sloes, Fresh
10
25
 
08101000
Strawberries, Fresh
14
29
Yes
08102000
Raspberries, Blackberries, Mulberries And Loganberries, Fresh
25
40
Yes
08104000
Cranberries, Bilberries and Other Fruits of the Genus Vaccinium, Fresh
30
45
 
08105000
Kiwifruit, Fresh
20
35
Yes
08106000
Durian, Fresh
20
35
Yes
08107000
Persimmons, Fresh
20
35
Yes
08109010
Lychee, Fresh
30
45
Yes
08109030
Longan, Fresh
12
27
Yes
08109040
Rambutan, Fresh
20
35
Yes
08109050
Sugar Apple, Fresh
20
35
 
08109060
Carambola, Fresh
20
35
Yes
08109070
Wax Apple, Fresh
20
35
Yes
08109080
Dragon Fruit, Fresh
20
35
Yes
08109090
Other Fruit, Fresh
20
35
Yes
08111000
Strawberries, Frozen
30
45
 
08112000
Raspberries/Blackberries/Mulberries/Loganberries/Black, White or Red Currants and Gooseberries, Frozen
30
45
 
08119090
Fruit And Nuts, Frozen, Other
30
45
Yes
08121000
Cherries, Provisionally Preserved, But Unsuitable In That State For Immediate Consumption
30
45
Yes
08129000
Fruit And Nuts, Other, Provisionally Preserved, But Unsuitable In That State For Immediate Consumption,
25
40
Yes
08131000
Apricots, Dried
25
40
Yes
08132000
Prunes, Dried
25
40
Yes
08133000
Apples, Dried
25
40
Yes
08134010
Longans and Longan Pulps, Dried
20
35
Yes
08134020
Persimmons, Dried
25
40
Yes
08134030
Red Jujubes, Dried
25
40
Yes
08134040
Preserved Litchi, Dried
25
40
Yes
08134090
Fruit, Other, Dried, Other Than That of Headings 0801 To 0806
25
40
Yes
08135000
Mixtures of Nuts Or Dried Fruits Of This Chapter
18
33
 
12112010
American Ginseng Roots, Fresh, Chilled, Frozen or Dried, Whether or Not Cut, Crushed
7.5
22.5
Yes
12112091
Ginseng Roots, Other, Fresh
20
35
Yes
12112099
Ginseng Roots, Other, Chilled, Frozen or Dried
20
35
Yes
22041000
Sparkling Wine Of Fresh Grapes
14
29
 
22042100
Other Wine Of Fresh Grapes or Grape Must With Fermentation Prevented Or Arrested By the Addition of Alcohol, In Containers Holding 2L or Less
14
29
 
22042200
Other Wine Of Fresh Grapes or Grape Must With Fermentation Prevented Or Arrested By the Addition of Alcohol, In Containers Holding More Than 2L But Not More Than 10L
20
35
 
22042900
Other Wine Of Fresh Grapes or Grape Must With Fermentation Prevented Or Arrested By the Addition of Alcohol, In Containers Holding More Than 10L
20
35
 
22043000
Other Grape Must Other Than That of Heading 20.09
30
45
 
22072000
Ethanol
30
45
Yes
 
TOTAL
 
 
 
Source: WTO
Figure 2. Trade in Goods Covered (2017)
HS Code
Description
Share of U.S. Total Exports to China
Chinese Imports from U.S.
China Imports from World
U.S. Market Share
(1,000 dollars)
02031200
Meat of Swine, Fresh or Chilled, Hams, Shoulders and Cuts Thereof, With Bone In
0%
31
40
77%
02031900
Meat of Swine, Fresh or Chilled, Other
0%
285,642
2,220,132
13%
02032190
Meat of Swine, Frozen, Carcasses and Half-carcasses, Other
33%
-
682
0%
02032200
Meat of Swine, Frozen, Hams, Shoulders and Cuts Thereof, With Bone In
34%
117,672
698,006
17%
02032900
Meat of Swine, Frozen, Other
9%
167,924
1,521,389
11%
02064100
Livers Of Swine, Edible, Frozen
0%
-
321
0%
02064900
Offal Of Swine Except Livers, Edible, Frozen
31%
873,830
2,112,742
41%
08011100
Coconuts, Desiccated
0%
9
22,152
0%
08011200
Coconuts in the inner shell (Endocarp)
0%
-
165,624
0%
08011990
Coconuts, Other
0%
2
703
0%
08012100
Brazil Nuts, Fresh Or Dried, In Shell
0%
-
112
0%
08012200
Brazil Nuts, Fresh Or Dried, Shelled
0%
-
30
0%
08013100
Cashew Nuts, Fresh Or Dried, In Shell
0%
28
11,687
0%
08013200
Cashew Nuts, Fresh Or Dried, Shelled
12%
20
46,906
0%
08021100
Almonds, Fresh Or Dried, In Shell
2%
24,595
24,618
100%
08021200
Almonds, Fresh Or Dried, Shelled
2%
68,298
70,910
96%
08022100
Hazelnuts Or Filberts (Corylus Spp.), Fresh Or Dried, In Shell
2%
3,006
3,006
100%
08022200
Hazelnuts Or Filberts (Corylus Spp.), Fresh Or Dried, Shelled
0%
-
27,537
0%
08023100
Walnuts, Fresh Or Dried, In Shell
3%
12,181
15,483
79%
08023200
Walnuts, Fresh Or Dried, Shelled
2%
17,648
18,328
96%
08024110
Chestnuts (Castanea Spp.), Fresh Or Dried, In shell
0%
-
22,039
0%
08024290
Chestnuts (Castanea Spp.), Fresh Or Dried, Shelled, Other
0%
-
74
0%
08025100
Pistachios, Fresh Or Dried, In Shell
3%
175,246
180,545
97%
08025200
Pistachios, Fresh Or Dried, Shelled
3%
2,333
3,250
72%
08026190
Macadamia Nuts In Shell, Other, Fresh Or Dried
96%
18,365
83,966
22%
08026200
Macadamia Nuts Shelled, Fresh Or Dried
2%
102
9,492
1%
08028000
Areca Nuts, Fresh Or Dried, Whether Or Not Shelled
0%
-
790
0%
08029030
Pine-nuts, Fresh Or Dried, Shelled
5%
3
96,711
0%
08029090
Other nuts, Fresh Or Dried
 
23,404
165,079
14%
08031000
Plantains, Fresh Or Dried
0%
-
0
0%
08039000
Bananas, Other Than Plantains, Fresh Or Dried
0%
0
579,265
0%
08041000
Dates, Fresh Or Dried
0%
180
4,111
4%
08042000
Figs, Fresh Or Dried
3%
21
1,943
1%
08043000
Pineapples, Fresh Or Dried
0%
-
145,745
0%
08044000
Avocados, Fresh Or Dried
0%
-
105,453
0%
08045010
Guavas, Fresh Or Dried
0%
-
1,147
0%
08045020
Mangoes, Fresh Or Dried
 
4
18,528
0%
08045030
Mangosteens, Fresh Or Dried
 
-
147,059
0%
08051000
Oranges, Fresh Or Dried
8%
86,627
381,825
23%
08052190
Mandarins (Including Tangerines and Satsumas), Other, Fresh Or Dried
0%
100
61,534
0%
08052200
Clementines
0%
-
83
0%
08052900
Wilkings And Similar Citrus Hybrids
1%
245
25,542
1%
08054000
Grapefruit, Including Pomelos
0%
963
51,172
2%
08055000
Lemons (Citrus Limon, Citrus Limonum) and Limes (Citrus Aurantifolia)
1%
5,230
31,150
17%
08059000
Citrus Fruit, Other, Fresh Or Dried
3%
-
409
0%
08061000
Grapes, Fresh
3%
51,895
588,026
9%
08062000
Grapes, Dried
6%
19,713
43,633
45%
08071100
Watermelons, Fresh
0%
-
31,864
0%
08071910
Hami Melons, Fresh
0%
-
14
0%
08072000
Papaws (Papayas) Fresh
0%
-
999
0%
08081000
Apples, Fresh
2%
45,377
115,067
39%
08083010
Ya Pears, Hsueh Pears, Fresh
0%
-
21
0%
08083090
Pears, Other, Fresh
 
2,198
12,340
18%
08092100
Sour Cherries (Prunus Cerasus), Fresh
3%
-
1
0%
08092900
Cherries, Fresh, Other Than Sour Cherries
20%
170,376
769,323
22%
08093000
Peaches, Including Nectarines, Fresh
0%
-
24,903
0%
08094000
Plums And Sloes, Fresh
7%
27,559
103,419
27%
08101000
Strawberries, Fresh
0%
245
245
100%
08102000
Raspberries, Blackberries, Mulberries And Loganberries, Fresh
0%
-
322
0%
08104000
Cranberries, Bilberries and Other Fruits of the Genus Vaccinium, Fresh
0%
-
103,230
0%
08105000
Kiwifruit, Fresh
0%
-
349,409
0%
08106000
Durian, Fresh
0%
-
552,124
0%
08107000
Persimmons, Fresh
0%
-
101
0%
08109010
Lychee, Fresh
0%
-
8,500
0%
08109030
Longan, Fresh
 
-
437,616
0%
08109040
Rambutan, Fresh
 
-
3,601
0%
08109050
Sugar Apple, Fresh
 
-
27,897
0%
08109060
Carambola, Fresh
 
-
447
0%
08109070
Wax Apple, Fresh
 
-
14,491
0%
08109080
Dragon Fruit, Fresh
 
-
389,496
0%
08109090
Other Fruit, Fresh
 
-
6,116
0%
08111000
Strawberries, Frozen
7%
1,873
20,352
9%
08112000
Raspberries/Blackberries/Mulberries/Loganberries/Black, White or Red Currants and Gooseberries, Frozen
0%
1
2,655
0%
08119090
Fruit And Nuts, Frozen, Other
2%
3,666
130,169
3%
08121000
Cherries, Provisionally Preserved, But Unsuitable In That State For Immediate Consumption
0%
-
1,282
0%
08129000
Fruit And Nuts, Other, Provisionally Preserved, But Unsuitable In That State For Immediate Consumption,
0%
-
823
0%
08131000
Apricots, Dried
1%
220
2,963
7%
08132000
Prunes, Dried
3%
3,209
7,722
42%
08133000
Apples, Dried
1%
167
201
83%
08134010
Longans and Longan Pulps, Dried
9%
-
91,336
0%
08134020
Persimmons, Dried
 
-
17
0%
08134030
Red Jujubes, Dried
 
2
49
4%
08134040
Preserved Litchi, Dried
 
-
5
0%
08134090
Fruit, Other, Dried, Other Than That of Headings 0801 To 0806
 
424
4,855
9%
08135000
Mixtures of Nuts Or Dried Fruits Of This Chapter
18%
570
1,059
54%
12112010
American Ginseng Roots, Fresh, Chilled, Frozen or Dried, Whether or Not Cut, Crushed
40%
13,723
38,523
36%
12112091
Ginseng Roots, Other, Fresh
 
-
470
0%
12112099
Ginseng Roots, Other, Chilled, Frozen or Dried
 
-
13,622
0%
22041000
Sparkling Wine Of Fresh Grapes
2%
237
75,517
0%
22042100
Other Wine Of Fresh Grapes or Grape Must With Fermentation Prevented Or Arrested By the Addition of Alcohol, In Containers Holding 2L or Less
6%
75,555
2,553,576
3%
22042200
Other Wine Of Fresh Grapes or Grape Must With Fermentation Prevented Or Arrested By the Addition of Alcohol, In Containers Holding More Than 2L But Not More Than 10L
13%
3,842
8,554
45%
22042900
Other Wine Of Fresh Grapes or Grape Must With Fermentation Prevented Or Arrested By the Addition of Alcohol, In Containers Holding More Than 10L
1%
2,090
158,967
1%
22043000
Other Grape Must Other Than That of Heading 20.09
52%
-
13
0%
22072000
Ethanol
3%
153
4,787
3%
 
TOTAL
5%
2,306,803
15,778,043
15%
Source: GTIS
 
 
 
 



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