China looks to replace US farm goods
American cherries are tantalizingly sweet. They are so loaded with sugar and low on water that China’s home-grown cherries cannot compete on taste or texture.
But this alone may not be enough, said Zhao Xiaoyu, a Beijing fruit merchant, who believes Chinese consumers will be biting into domestic cherries and lower quality fruit from elsewhere after July 6, when China is expected to impose a 25-percent border tax on hundreds of American goods.
Simmering trade tensions between the world’s top two economies are set to erupt into a full-blown trade war Friday, with Washington poised to impose new tariffs on $34 billion in Chinese goods.
Beijing has pledged to hit back dollar for dollar, placing a new tax on American goods like cherries, soybeans, autos, pork and whiskey, putting them at a disadvantage to their global rivals.
Washington’s list is heavy on tech goods, aiming in part to shift supply chains away from China, while Beijing has put politically sensitive US farm goods in the firing line.
“For simple products it’s going to be faster to shift production, but for more complex products it’s going to be difficult,” said Denis Depoux, from consultancy Roland Berger, noting the quickest manufacturers will need at least a year and “won’t make the changes until they know this is real and here to stay.”
Farm products would appear simpler to substitute, Depoux noted, adding it would depend on the volumes available elsewhere and may require a planting season or two.
A day without beans
The Chinese saying “Take a day without meat, but not a day without beans” speaks to the importance of soybeans in the world’s number-two economy.
Providing critical protein in animal feed and used in cooking oil, 1.4 billion Chinese rely on imported soybeans, primarily from the US and Brazil.
Last year, China imported $14 billion of soybeans from the US, its largest imported good.
No other single country grows enough to satiate China’s demand, soybean traders say, with annual imports of about 95 million tons — about the weight of 60 million cars — making it hard to move completely away from the US.
“As soon as the tariffs are slapped on, this will be reflected in the price of soybeans,” said Cui, a soybean trader at Scents Holdings Beijing, which has bought tens of millions worth of the beans from the US, according to figures from Panjiva, a trade data firm.
“When it gets to regular people’s dining room tables, whether it’s meat or cooking oil, there will be a price effect,” Cui said, asking for his full name not to be used.
To lessen the self-inflicted shock, Beijing is searching for replacements.
“There are prospects for more soybeans from South America, the so-called ‘Stan’ countries in central Asia and even Eastern Europe,” said Si Wei, a professor at China Agricultural University.
“How much we can replace, this still needs to be looked into,” he said, adding China may also substitute rapeseed from Australia and Canada to make animal feed.
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