Overview of the Situation
China has announced that it will suspend additional tariffs of 24% imposed on US products in April for one year. Additionally, China will maintain the 10% tariffs introduced in response to Donald Trump’s “Liberation Day” tariffs. The move comes after a meeting between US President Trump and Chinese President Xi Jinping in South Korea, which eased concerns about the two largest economies abandoning trade talks aimed at resolving a tariff war disrupting global supply chains.
Key Tariff Changes
- Suspension of 24% Tariffs: China will suspend the additional 24% tariffs on US products for one year.
- Maintenance of 10% Tariffs: China will keep the existing 10% tariffs in place, which were implemented as a response to Trump’s “Liberation Day” tariffs.
- Removal of Agricultural Tariffs: China will eliminate tariffs up to 15% on certain US agricultural goods, which were imposed starting from November 10, as mentioned in a March communication outlining the products China would start taxing on imports.
Impact on Soja Trade
Despite these changes, Chinese buyers of soja will still face 13% tariffs, including a pre-existing base tariff of 3%. This makes US soja shipments too expensive compared to Brazilian alternatives, according to industry operators.
Before Trump took office in 2017 and initiated the first US-China trade war, soja was a major US export to China, with the world’s largest agricultural buyer purchasing $13.8 billion of the staple crop in 2016.
However, China largely refrained from buying US soja this year, causing significant losses for American farmers due to lost export revenue. In 2019, China purchased around 20% of its soja from the US, compared to 41% in 2016, according to customs data.
Background on US-China Trade Relations
Investors on both sides of the Pacific breathed a sigh of relief last week when Trump met with Chinese President Xi Jinping in South Korea, easing fears that the world’s two largest economies might abandon talks to resolve a tariff war disrupting global supply chains.
While Trump and the White House quickly shared their impressions of the meeting, China did not immediately provide a detailed summary of what was agreed upon.
State-owned Chinese company COFCO purchased three US soja cargoes the day before the summit, which analysts interpreted as a gesture of goodwill indicating Peking’s desire to prevent further escalation of trade tensions.
Some market participants expressed skepticism about the soja trade quickly returning to normalcy.
“We don’t expect China’s demand to return to the US market with this change,” said an international trade operator. “Brazil is cheaper than the US, and even non-Chinese buyers are taking Brazilian cargoes.”
Additional Tariff Changes
China will also remove and suspend control measures on exports to 15 US entities for one year, effective November 10, according to a Chinese Commerce Ministry statement. These measures will be kept in suspense for another year regarding other entities added to the “unreliable entity” list in March and April.
These changes will allow Chinese exporters to apply for the export of dual-use products to these entities. Another measure relates to the “unreliable entity” list, enabling domestic companies to apply for transactions with these entities.
Fiber Optic Tariff Elimination
China will also eliminate tariffs on certain US imports of fiber optics starting November 10, as announced by the Commerce Ministry. These tariffs were imposed in September following an investigation initiated in March.
