India to gain as China lifts tariffs on Asian feeds amidst trade spat with US
27 June 2018
China will remove import tariffs on animal feed ingredients, including soybeans, soymeal and rapeseed from five Asian countries, the ministry of finance said on Tuesday, as Beijing tries to stock up supplies of the commodities amidst an escalating trade war with the United States, its largest trading partner.
China will drop tariffs on soybeans, soymeal, soybean cake, rapeseed and fishmeal originating from Bangladesh, India, Laos, South Korea and Sri Lanka from 1 July, the ministry said.
India stands to gain most by the Chinese action as the country is the main producer of Soybean in the South Asian region while other countries included in the list are relatively small producers. None of them exported any of the oilseeds to China in 2017.
India grew 11 million tonnes of soybeans in the 2016-17 marketing year, but only exported 269,000 tonnes of it, according to data from the US Department of Agriculture.
However, the country exported more than 2 million tonnes of soymeal globally.
The country, being a net importer of oils and oilseeds, does not make any substantial export of any oilseed or oil.
China currently applies 3 per cent tariff on import of soybeans while it applies 9 per cent import duty on rapeseed, a 5 per cent duty on soymeal and cake and a 2 per cent import duty on fishmeal.
Soybeans form the largest chunk of China’s agricultural imports from the United States by value. While China claims the tariff cut as planned in March, the move is aimed at reduce its dependence on US soybeans.
China agreed to drop the tariffs on more than 2,000 items as part of the Asia-Pacific Trade Agreement signed in Thailand in January 2017. The finance ministry said in March this year it would introduce the tariff cuts from 1 July.
The move comes less than two weeks after Beijing said it would impose additional 25 per cent tariffs on 659 US goods worth $50 billion, including soybeans, in retaliation for US slapping duties on Chinese technology products.
US President Donald Trump has ordered 25 per cent tariffs on $50 billion worth of Chinese goods in response to Beijing’s forced transfer of US technology and alleged intellectual property theft, and threatened to impose duties on $400 billion more in Chinese products.
“We have the great brain power in Silicon Valley, and China and others steal those secrets,” Trump said on Fox & Friends earlier this month.
″We’re going to protect those secrets. Those are crown jewels for this country.”
All told, the scope of the tariffs would be equivalent to 90 per cent of the goods that China shipped to the United States last year.
The People’s Bank of China (PBOC), China’s central bank, also on Sunday said it would cut the amount of cash that some banks must hold as reserves by 50 basis points, releasing $108 billion of additional liquidity, to accelerate the pace of debt-for-equity swaps and spur lending to smaller firms.
The reserve reduction, the third by the central bank this year, comes amid investor concerns over market liquidity and a potential economic drag from a trade dispute with the United States.
PBOC said the latest targeted cut in some banks’ reserve requirement ratios (RRRs) – currently 16 per cent for large banks and 14 per cent for smaller banks – will take effect on 5 July.
The PBOC said the cut will release about 500 billion yuan ($77 billion) for the country’s five large state banks and 12 national joint-stock commercial banks. Lenders are encouraged to use the money to conduct debt-for-equity swaps.
The Chinese yuan on Friday also fell to its lowest versus the dollar in more than five months, though it has remained firm against a basket of trading partners’ currencies, and a sharp depreciation is not in the cards.
Fears of a full-scale trade war with Washington have magnified concerns about the outlook for the world’s second-largest economy, following weaker-than-expected Chinese growth data for May and as Beijing’s financial regulatory crackdown starts to weigh on business activity.
Net exports overall were already a drag on growth in the first quarter after giving an added boost to the Chinese economy last year, highlighting the need for sustained strength in domestic demand if significant new US tariffs are imposed.
China accused the United States last week of using bullying tactics and blackmail in threatening to impose tariffs on hundreds of billions of dollars of Chinese imports, ramping up criticism that the measures levied in the name of balancing trade would harm both countries’ companies and the world economy.
Commerce Ministry spokesman Gao Feng said the US was damaging the global trading order and that its methods would harm its own business interests as well as those of trading partners.
“We oppose the act of extreme pressure and blackmail by swinging the big stick of trade protectionism,” Gao told reporters at a news conference.
“The U.S. is abusing the tariff methods and starting trade wars all around the world.”
US, European and other governments have repeatedly complained their firms operating in China are being compelled to surrender technology as part of Beijing’s bid to create world-leading companies in fields such as robotics and electric cars under a program it calls “Made in China 2025.”
Economists note the US global trade deficit started to balloon several years before China’s surplus started to surge. They say that suggests the reason behind the imbalance lies somewhere other than China.