20 August 2021 - US farmers are shipping record volumes of crops and meat to China, with year-to-date exports totalling $13.8 billion, up 128% compared to the same period in 2020, according to the US Department of Agriculture's (USDA) January to June 2021 data.
"There's a legitimate chance China could come close to reach its promised level of [around] $40 billion for the year," said Former US Trade Negotiator and VP Global Situational Awareness & Chief Economist at Aimpoint Research Gregg Doud.
Doud was speaking at AFIA's Purchasing and Ingredient Supplier Conference (PISC) in Orlando.*
China pledged to purchase more than $80 billion of US agricultural products over two years under the phase one trade deal between the two countries.
The 14 February 2020 implementation of the phase one deal between the US and China established new US tariffs on imports from China for the foreseeable future.
Average US tariffs on imports from China remain elevated at 19.3%. According to data from the Peterson Institute for International Economics, these tariffs are more than six times higher than before the trade war began in 2018 and cover 66.4% of Chinese exports to the US.
In retaliation for US tariff increases on Chinese imports, China implemented tariff increases on imports of US products, including animal food products such as whey, alfalfa meals and pellets, animal and vegetable fats and oils, meat and bone meal, fishmeal, beet pulp, distillers dried grains with solubles in pet food, and other preparations used in animal feeding.
The tariffs paid by US importers were kept in place to guarantee that China meets its obligations under the US-China phase one trade deal.
According to the AFIA, at least four tariffed feed ingredients are predominantly, or exclusively in some cases, sourced from China.
"While the US-China phase one agreement addressed several constraints keeping US animal food products out of the Chinese market, the industry now has increased tariff barriers," said Gina Tumbarello, AFIA's senior director of international policy and trade.
"The AFIA has asked for remediation of tariffs that China has imposed on US animal food products that are limiting our industry's ability to compete in their market," Tumbarello said.
The most favoured nation (MFN) tariff on US imports of vitamin K is 5.5%. In September 2019, vitamin K imports from China became subject to a 10% ad valorem duty, which increased to 15% in August 2020, making the vitamin K tariff rate on imports from China 20.5%.
The MFN tariff on US imports of inositol is zero. However, in September 2019, imports from China became subject to a 10% ad valorem duty, which increased to 30% in March 2020, making the tariff rate on imports from China 30%.
Vitamin D3 and vitamin B12 imports from China became subject to a 10% ad valorem duty each.
"One company expressed that the additional tariffs on their vitamin D3 and B12 imports cost them an estimated $500,000/year and $227,000/year respectively," Tumbarello said. "This is one of many US companies importing these vital ingredients for animal food use."
The AFIA has requested the exclusion of vitamin D3, vitamin K, vitamin B12, and inositol from Section 301 tariffs.
"The intent of the Section 301 tariffs was to protect domestic production. However, not only does the US not produce these products, but the animal food industry also depends on these inputs for feed and pet food manufacturing," Tumbarello said.
The negotiated deal under the Trump administration with China expires at the end of this year.
According to Doud, after the agreement ends China is likely to generate situations to maintain an advantage to remove the $360 billion in tariffs on Chinese imports.
"We have to be mindful on January 1 of next year, the US will still have $360 billion worth of tariffs on imports from China," Doud said.
All the structural changes negotiated in the phase one agreement will stand; however, another conversation will likely be coming, he added.
"Some things are good now, and they can continue to be good, but there will be uncertainty, I promise you, and friction with all of this."
Several US trade groups, including the US Chamber of Commerce, the Business Roundtable, The National Retail Federation, and the American Farm Bureau Federation, recently came together to urge the Biden administration to resume talks with China and cut tariffs on imports, claiming that they are a drag on the US economy.
"The USTR still does not have a Chief Agriculture Negotiator. We need this for our industry, and it is paramount," Tumbarello said. "The administration has said they do not have a timeline for change. We are several months into this process, and we are not hearing any strategy for continuing the talks. This is not encouraging."
Earlier this month, US Secretary of State Antony Blinken said the country needs to invest in infrastructure before focusing on trade policy.
"Agriculture is a shining star when it comes to exports. It brings much value to the US economy. Unfortunately, the tariffs are causing this region to lose its competitive advantage and fall behind the competition. It would be a shame not to consider agriculture trade policy as part of the US economic recovery strategy," Tumbarello said.
* The American Feed Industry Association's annual Purchasing and Ingredient Suppliers Conference (PISC) is taking place during the week of 16 August in Orlando, Florida. As a media sponsor of this AFIA-PISC event, Feedinfo provides coverage on the key issues impacting the American feed industry, including market conditions, policy, international trade, supply chain issues, and more.
