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Chinese Tariffs Go Into Effect
USAgNet - 04/03/2018

Following President Donald Trump's China tariffs announcement, Beijing had floated the idea of hitting the U.S. with tariffs on 128 products included dried fruit and pork. Monday, Beijing announced they would be making good on this threat and implementing the tariffs on $3 billion worth of imported U.S. goods. The China tariffs have led many to speculate that a trade war between the worlds two largest economies has begun.

President Trump imposed the 15% aluminum and 25% steel tariffs citing a rarely used trade provision which allows the president to impose tariffs on the grounds of national security. China, along with a number of other trading partners, claim the tariffs are a violation of international trade laws. Several key US allies, including Mexico, Canada, South Korea, and the European Union have been exempted from the steel and aluminum tariffs.

China has indicated that their tariffs were issued in retribution to President Trump's steel and aluminum tariffs which targeted a number of countries, including China. Tariffs are often seen as retaliatory measures and the China tariffs are no exception, indicating growing tensions between the two countries. The China tariffs were originally proposed 10 days ago, leading to speculation over whether Beijing would actually implement them.

The U.S. isn't the only trading power taking issue with China's economic policies. Japan and Europe have also clashed with the communist country over its state-led model which violates free trade agreements and limits access to the market.

As on Monday, Beijing is implementing a 15% tariff on 120 American goods including fruits, nuts, and steel pipes. Another eight products will be sanctioned at 25% including recycled aluminum and pork. Sunday, Beijing also announced they will be adding a 15% tariff on US imported ethanol, increasing the duty to 45%.

The ethanol tariff eliminates the cost difference between buying Chinese ethanol and the cheaper American ethanol. In an effort to reduce the infamous smog that covers many Chinese cities, the Chinese government plans to mandate that all gasoline be blended with ethanol by 2020. This plan calls for 16.5 million tons of ethanol, which requires nearly 50 million tons of corn to produce. Currently, China only produces around 2.7 tons of ethanol annually. Experts believe the Chinese market will be unable to meet the demand for domestically produced ethanol. Brazil is the largest producer of ethanol in the world, but their prices are still much to high for China. Economists believe this will force China to once again turn to US production of ethanol.

Experts point out that the $3 billion fingered by China for tariffs is just a small percentage of the hundreds of billions of dollars in goods that flow annually between the US and China. Tariffs are unlikely to hinder this trade relationship anytime soon, but they could have serious consequences for certain industries. US pork producers worry that the 25% tariff on pork could have a significant impact on rural America. Chinese voices have called for a tariff on US imported soybeans. China currently stands as the largest market for U.S. soybeans. A tariff on soybeans could have further consequences for rural America, an import fraction of President Trump's base.

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