Emerging Markets / January 27, 2017

Agriculture and Tariffs between the US and China

China and Canada are the largest and most important trading partners of the United States, each accounting for more than 15%, respectively, of all international trade conducted by the US. In the case of the relationship between the US and Canada, imports and exports between the two countries are almost equal, meaning that the trade deficit of the US totals less than US$10 billion. On the other hand, with China, the trade deficit against the US is substantial, accounting for approximately US$320 billion. During 2016, Chinese exports to the US totaled about US$420 billion or 18% of all Chinese exports. Meanwhile US exports to China during 2016 represented some US$100 billion. This article explores trade relations between China and the US.

Agriculture and Tariffs between the US and China

The main export sectors within the US economy include consumer and capital goods, industrial supplies, and agricultural products. Within the agricultural industry in particular, China purchases more than 45% of all US fruit and seed exports, such as soybeans and apples. Similarly, China purchases more than 20% of all US wood exports. In the case of imports into the US, China represents more than 20% of the total, while Mexico and Canada each account for 13%, respectively.

Currently the US and China have no free trade agreement in place, which means that both countries can and do apply duties and tariffs on each other’s commercial products. In January of 2017, the Chinese State Council Duty Committee announced several changes and additions to its tariff regime that affect agricultural trade. Amongst the changes issued by the Chinese State Council is a decrease on the import tariff for frozen and fresh fish products. For example, in the case of frozen tuna fish, the import duty has gone from 12% to 6%. Similarly, the import tariff for manufactured pet food has been decreased from 15% to 4% as well as the tariff on fresh cranberries, which has gone from 30% to 15%. Another import tariff that was decreased is that for non-alcoholic beverages which went from 35% to 20%. On the other hand, an import tariff that was increased is that for denatured ethanol, which has gone from 5% during 2016 to 30% in 2017.

An important and growing market within China, which is also strictly regulated, is that of planting seeds. In fact, China is the second largest market in the world for planting seeds, worth approximately US$17 billion. This domestic market is controlled by the Ministry of Agriculture, which must approve every new strand and variety of planting seed cultivated in the country. Through this policy, China seeks to not only regulate, but also to strengthen its domestic planting seed industry. During 2015, the Plant Variety Protection division of the Ministry of Agriculture received more than 500 applications for new or modified rice varieties, of which it approved less than 390. Similarly, during 2015, the Plant Variety Protection division received applications for more than 760 strands of corn and only approved 331 for cultivation.

(Read more about Trade and Agriculture between the United States and Canada)