China gets strict on U.S. soybeans
Agricultural action could signal the start of a potential trade war.
For years, one bright spot in the United States’ huge trade imbalance with China has been Beijing’s soaring appetite for American agriculture.
But this month, China abruptly imposed stricter requirements on billions of dollars worth of American soybeans in a way that threatens to curb the exports and punish much of the U.S. heartland.
And that could be just the beginning, if President Donald Trump follows through on his oft-repeated promise to get tough with China on trade.
Although Chinese media attributed the new policy to quarantine officials who reported finding mildew contamination in some shipments, the tactic was familiar and the message unmistakably clear.
“It was kind of a warning shot that they’re not going to take things lying down, and that there will be pain for U.S. exporters” should Trump levy trade sanctions on China, said David Loevinger, a former senior Treasury Department official for China affairs and now an analyst for TCW Emerging Markets Group in Los Angeles.
Derek Scissors, a China specialist at the American Enterprise Institute, said the two most likely targets of Chinese retaliation are soybeans and airplanes. They are America’s top two exports to China, and farmers in particular have long had considerable
influence on Congress.
After a relatively quiet first year on China trade, the Trump administration is preparing to announce several actions, possibly including tariffs stemming from investigations into Chinese behaviors that it views as distorting trade and hurting U.S. companies and workers.
Among those are allegations of intellectual property theft and forced technology transfer in which U.S. companies wanting to do business in China must turn over their tech and production secrets, which Chinese competitors then adopt. Trump officials started the investigation by using an old provision of U.S. trade laws that gives the president broad powers to apply punitive measures.
Late Thursday, the Commerce Department said it sent Trump the results of an investigation into whether steel imports threaten U.S. national security. China, the biggest steel producer, was the target and tariffs, import quotas or both could be coming. Trump has 90 days to decide.
Separately, the U.S. International Trade Commission decided last week that imports of Chinese aluminum were hurting the U.S. industry, and will now determine what penalties would be appropriate. The Trump administration took the rare step of starting the aluminum case on its own, even though no U.S. companies had filed a complaint.
A decision to impose tariffs on Chinese aluminum, steel or solar panels probably would not be enough to trigger a serious trade conflict.
Instead China probably would give a measured response, given their relatively small impact on the Chinese economy, said Andy Rothman, an investment strategist at Matthews Asia in San Francisco and former economic officer at the U.S. Embassy in Beijing.
Others say that if American jobs and wages keep growing as expected, Trump will have economic cover to put off action or continue to apply a light hand in his dealings with China, as he has so far.
Trump last year declined to label China a currency manipulator despite his campaign promise to do so as soon as he took office. As a candidate, he also threatened to impose tariffs of 45 percent on Chinese imports.
But last year, Trump approached Chinese President Xi Jinping in hopes of using trade as leverage to win Beijing’s help in reining in North Korea’s nuclear ambitions. That strategy has had mixed results, at best.
And with his trade and economic team now largely in place, including U.S. trade representative Robert Lighthizer, Trump wants fundamental changes in China trade, not incremental improvements.
To that end, Trump officials already have made it clear that the United States won’t support China’s ambition to be recognized at the World Trade Organization as a market-based economy.
His administration has signaled that Chinese investments in the United States will find it harder to win approval.
And in a sharp departure from recent administrations, Democratic and Republican, Trump’s National Security Strategy, issued last month, referred to China and Russia as threats to the United States, noting that the two nations “challenge American power, influence and interests, attempting to erode American security and prosperity.”
Even with increased American exports of foods, planes and medical equipment, the overall U.S. trade deficit in goods with China has not only kept rising under Trump, but almost certainly reached a new record last year, exceeding the previous high of $367 billion in 2015. The full-year results will be released next month. (The Chinese government last week said its trade surplus with the United States last year was the largest ever.)
Trump has repeatedly denounced large deficits with trading partners, none of which is bigger than the one with China. He is sure to come under increasing pressure from constituents in states where Trump’s attacks on foreign trade were particularly popular, and helped him win the election.
In the past, Beijing could count on American corporations to press the White House and Congress to soften their stance on China, but there’s a lot more ambivalence today. U.S. businesses have become increasingly frustrated at Chinese policies favoring domestic companies, and with the central government’s broad retreat from its 2013 plan to increase economic reforms and let market forces drive growth in the country.