CHINA TRADE: PORK FEELS THE PINCH  

On March 23, the United States began collecting increased duties on steel and aluminum imports from China.  Given the exemption for top suppliers to the U.S. - Canada, the EU, and South Korea - China is right up there. And China is the world's largest producer and largest exporter of both products. 

Today, China hit back, imposing retaliatory tariffs on some $3 billion in U.S. exports to China.  Last year, the U.S. shipped more than $1 billion worth of pork to China, and pork was at the top of the list. To say the least, America's pork producers are concerned. 

Neil Dierks, the CEO of the National Pork Producers Council, issued a statement earlier today on these unhappy developments.  His hope is expressed in today's featured quote.  The full statement reads as follows:

Pork products aren't the only things on China's retaliation list. There are 128 items after all - everything from cashews to hazelnuts (Oregon is America's top producer of hazel nuts) and from wine to, naturally, certain steel products, including stainless steel pipe.  But the pork products are the largest targeted export to China by value, and they carry the higher, 25 percent, punitive tariffs.  All of the other items are being assessed only an additional 15 percent.

Some have suggested that the Chinese have shown remarkable restraint by targeting "only" $3 billion in U.S. exports.  We think that estimate is a bit off the mark for a couple of reasons.  First, its credibility arises from the understandable temptation to set China's current retaliatory response on $3 billion of U.S. exports against America's threat to target some $60 billion of Chinese exports to the U.S.  Our understanding, however, is that the current retaliation is solely in response to the action on steel and aluminum, which the U.S. has already taken. We can only guess at what China will do if America puts punitive tariffs on a large volume of China's exports in other categories.

Those are likely to come in response to the self-initiated Section 301 case that the United States brought against China for its theft of and strong-arm tactics to acquire U.S. intellectual property.  However, if we are correct, the U.S. has not yet announced a list of the Chinese imports the Administration plans to target with new, restrictive tariffs, though rumors abound.  That is still to come.  So too are comments from the concerned U.S. companies, to say nothing of a definitive Chinese reaction. In thinking about U.S. companies, it is worth recalling that America has over $92 billion in investments in China.  Among other things, that means the Chinese government has a lot of screws to turn, not just tariffs.

Finally, two things are clear from Ambassador Lighthizer's recent appearances.  One is his view that a confrontation with China is not only inevitable but necessary because the trends, particularly the bilateral deficit, are unsustainable and deleterious to the United States.  The other is that, even when he is being optimistic, he doesn't see a quick fix here.  He made that point in his comments to CNBC on March 28.  After noting that the U.S. and China have very different systems, state capitalism in China and a market economy in the United States, Ambassador Lighthizer said:

Views will differ as to whether the course the Administration is now on is necessary or foolish.  Either way, if they stick to it, it is going to be painful.  But, in the end, it's all politics; so that's a big if. 

From NPPC is a link to the website of the National Pork Producers Council, which today carries a statement by NPPC's CEO Neil Dierks.  In it, Mr. Dierks highlights importance of exports to America's pork producers and the more than $1 billion in pork exports that the U.S. shipped to China in 2017.  This was the source for today's featured quote. 

The Full List is an article from Quartz, www.qz.com, that opens with a smiling picture of President Xi Jinping and follows with the full list of the items being hit with new, retaliatory tariffs from China.  

Steel by the Numbers is a CNN report of March 2, 2018, with an overview of global trade in steel.  It puts the value of China's steel exports to the United States in 2017 at $1.96 billion. 

Steel and Aluminum - A Proclamation.  This is the Presidential document of March 22 that now governs much of the important of these two metals into the United States.

Announcing the KORUS Amendments is a link to Ambassador Lighthizer's CNBC interview on March 28.  Though KORUS was the main topic, the interview also included a brief discussion of U.S.-China trade, and some of that is quoted above.