China Responds to U.S. Aluminum and Steel Tariffs

Market Intel / April 3, 2018

Credit: Sgt. Mikki Sprenkle/Public Domain 

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.

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        
           

Contact:
Veronica Nigh
Economist
(202) 406-3622
veronican@fb.org
 

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