China hits US agriculture, says won't be bullied by fresh Trump tariffs

Mar 4, 2025 - 09:05

A drone view shows containers and cargo ships at a port in Wuhu, Anhui province, China February 4, 2025. China Daily via REUTERS/File Photo

BEIJING - China on Tuesday swiftly retaliated against fresh U.S. tariffs, announcing hikes to import levies covering $21 billion worth of American agricultural and food products, moving the world's top two economies a step closer towards an all-out trade war.

Beijing also placed twenty five U.S. firms under export and investment restrictions on national security grounds, but refrained from punishing any household names, as it did when it retaliated against the Trump administration's February 4 tariffs.

In a press conference, China's foreign ministry said the country has never succumbed to bullying or coercion, and that "trying to exert extreme pressure on China is a miscalculation and a mistake."

China's latest retaliatory measures came as the extra 10% duty U.S. President Donald Trump threatened the world's second-largest economy with last week entered into force at 0501 GMT on March 4, resulting in a cumulative 20% tariff in response to what the White House considers Chinese inaction over drug flows.

China has accused the White House of "blackmail" over its tariff hike, saying it has some of the world's toughest anti-drug policies.

Analysts say Beijing still hopes to negotiate a truce with the Trump administration, deliberately setting its tariff hikes below 20% to leave Chinese negotiators room to hash out a deal, but each escalation reduces the chance of a rapprochement.

"China's government is signalling that they do not want to escalate," said Even Pay, agriculture analyst at Trivium China.

"It's fair to say we're in the early days of Trade War 2.0," Pay added, noting that there is still time to avoid a protracted trade war if Trump and Chinese President Xi Jinping are able to strike a deal.

The new U.S. tariffs represent an additional hike to preexisting levies on thousands of Chinese goods.

Some of these products bore the brunt of sharply higher U.S. tariffs under former president Joe Biden last year, including a doubling of duties on Chinese semiconductors to 50% and a quadrupling of tariffs on Chinese electric vehicles to over 100%.

The 20% tariff will apply to several major U.S. consumer electronics imports from China that were previously untouched, including smartphones, laptops, videogame consoles, smartwatches and speakers and Bluetooth devices.

China responded immediately after the deadline, announcing it will impose an additional 15% tariff on U.S. chicken, wheat, corn and cotton and an extra 10% levy on U.S. soybeans, sorghum, pork, beef, aquatic products, fruits and vegetables and dairy imports from March. 10.

The additional levies will hit about 15% of U.S. exports to China or $21 billion worth of trade, according to Reuters calculations based on U.S. customs data for 2024.

Beijing also added 15 U.S. companies to its Export Control List, which prohibits Chinese firms supplying American companies with dual-use technologies, and 10 American companies to its Unreliable Entity List for selling arms to Taiwan, which China claims as its own territory.

"We're still on track to 60% (tariffs)," said Cameron Johnson, supply chain expert at Tidalwave Solutions, referring to Trump's campaign trail threat.

"At the moment, with 20%, it just barely moves the needle for companies wanting to move potential supply chains out of the country," he added. "At 35%, we start to see that companies will start to move or consider other strategies."

China is the biggest market for U.S. agricultural products, and the sector has long been vulnerable to being used as a punching bag in times of trade tensions.

Chinese imports of U.S agriculture goods fell for a second year to $29.25 billion in 2024 compared to 42.8 billion in 2022.

China's futures markets were steady after the announcement. The world's biggest agricultural importer's most actively traded soymeal and rapeseed meal futures saw a 2.5% increase on Monday after the Global Times reported Beijing planned to hit U.S. agricultural exports.

SUPPLY-CHAIN SHIFTS

Trade tensions risk exacerbating U.S. inflation and China's continuing efforts to mount a durable post-COVID economic recovery, which has been heavily reliant on exports.

The U.S.-China Business Council (USCBC) on Tuesday applauded Trump's goal of addressing the illegal trade of fentanyl, but said raising tariffs on Chinese products "is not the way to achieve that goal."

"Across-the-board tariffs will hurt U.S. businesses, consumers, and farmers and undermine our global competitiveness," USCBC President Sean Stein said in a statement.

All the same, the China-U.S. trade war could benefit third countries.

Since the U.S. and China imposed tit-for-tat tariffs during Trump's first term, Beijing has taken steps to reduce its reliance on American farm goods by promoting production at home and buying more from countries like Brazil.

U.S. agricultural exporters could also step up efforts to replace the China market by shipping more to Southeast Asia, Africa and India.

"Chinese tariffs on U.S. wheat and corn imports should be supportive for demand for Australian wheat and barely exports," said Dennis Voznesenki, analyst at Commonwealth Bank in Sydney. "However, China's recent slowdown in imports of feed grains from all origins should temper the excitement."

COMMENTS:

OLE HANSEN, HEAD OF COMMODITY STRATEGY, SAXO BANK

"From a pricing perspective, this is happening at a very bad time for U.S. corn prices, which were already under some selling pressure from hedge funds that in the past few months accumulated very large and extended bets on higher prices.

"This will continue to increase China's dependency on Brazil corn and soybeans while causing a great deal of stress among U.S. farmers who are about to make their spring planting decisions in the coming weeks."

CHARU CHANANA, CHIEF INVESTMENT STRATEGIST, SAXO, SINGAPORE

"While the moves from China may not be particularly bold, there is a reason to believe that China wants to be on the negotiating table with Trump rather than sitting back and absorbing the blows. The move still brings risks of an escalation first in trade tensions before resolution.

"China's actions could also be indicative of the fact that they may be more confident of responding to domestic headwinds now, especially as they catch up to the AI race. There will be increased focus on what policy stimulus come through from the twin sessions."

TOMMY XIE, HEAD OF GLOBAL MACRO RESEARCH, OCBC BANK, SINGAPORE

"Exchange rate is a relative concept, and so is tariff. As long as other countries are also levied tariffs, or have such expectations, it won't be that bad. The thing to worry about is only one person gets tariffs. If the United States charges everyone, it will be considered as paying protection fee."

CHARLES WANG, FOUNDER, DRAGON PACIFIC CAPITAL MANAGEMENT, SHENZHEN

"The U.S. is facing various challenges, and the trade war will only make things worse. They include inflation, relations between the U.S. and Europe and China.

"For China, we have reduced trade dependency with the U.S. from 23% to around 13%, so the direct impact is limited. In addition, China's economy is recovering, and the parliamentary meeting will provide more signals for supporting the economy.

Therefore, I don't think the stock market trajectory will be changed. There're some curbs on the Hong Kong market, which, if anything, needs a small correction. But it's OK. Not a big deal."

LIU JINLU, AGRICULTURAL RESEARCHER AT GUOYUAN FUTURES, BEIJING

"This news has raised concerns about tightening domestic agricultural supplies, benefiting the sector. China’s 10% tariff on U.S. soybeans will increase costs and reduce U.S. imports, leading China to boost imports from Brazil and other countries.

"However, South America, especially Brazil, is approaching its soybean export limit after years of growth (2024 exports are expected at 96 million tons). Currently in the harvest season, Brazilian soybeans have not yet arrived in large quantities at Chinese ports but are expected in Q2. With the additional U.S. tariffs, the already tight soybean stock will become even more strained."

GENEVIEVE DONNELLON-MAY, RESEARCHER AT OXFORD GLOBAL SOCIETY, MELBOURNE

"While the new tariff announcement is not as heavy as the 25% in 2018, it does target many of the same agricultural products. In addition, the 10% tariff may provide Beijing with the opportunity to increase the tariffs on U.S. agricultural goods by another 10% or even 20% in the coming months and years.

"Soybeans were considered a weak link during the first Trump administration but Chinese policymakers have learned lessons from that time and are, in theory, much better prepared, due in part to Beijing's food import diversification strategy."

WANG ZHUO, PARTNER AT HEDGE FUND ZHUOZHU INVEST, SHANGHAI

Raising tariff on China "will likely hurt the U.S. itself as it needs cheap Chinese products to bring down inflation. Higher tariffs on U.S. agricultural products will also negatively impact China", but countermeasures are politically necessary. "So, it would be wise to make some symbolic move without triggering an escalation in tensions."

DENNIS VOZNESENSKI, ANALYST, COMMONWEALTH BANK, SYDNEY

"Chinese tariffs on U.S. wheat and corn imports should be supportive for demand for Australian wheat and barley exports. However, China's recent slowdown in imports of feed grains from all origins should temper the excitement."

WAN CHENGZHI, ANALYST, CAPITAL JINGDU FUTURES, DALIAN CITY

"Considering that China's peak import period for U.S. soybeans has already passed, the impact of these countermeasures on the total volume of U.S. soybean imports is limited. Any price increases in the future are likely to be more of an emotional market response."

OLE HOUE, DIRECTOR OF ADVISORY SERVICES, IKON COMMODITIES, SYDNEY

"It is broadly negative for U.S. agricultural markets. It is going to have a bearish influence on prices. There are enough corn and soybean supplies in the world for China to make the switch, it is more of an issue for the U.S., 30% of U.S. soybeans still go to China."

EVEN PAY, AGRICULTURE ANALYST, TRIVIUM CHINA

"It's notable that Beijing's response is restrained. Trump has now imposed a total of 20% tariffs on all Chinese products. China's tariffs impact a limited number of U.S. products, and remain below the 20% level. This is by design. China's government is signalling that they do not want to escalate, they want to deescalate.

"It's fair to say we're in the early days of Trade War 2.0. There's still time and space to avoid a protracted, entrenched trade war if Trump and Xi can strike a deal."

ROSA WANG, ANALYST, SHANGHAI-BASED AGRO-CONSULTANCY JCI

"From the supply and demand perspective, the short-term impact on the domestic market won't be significant. The reasons are: 1. It is currently the South American soybean season, while the U.S. soybean is in the off-season; 2. The amount of U.S. soybeans purchased by China has decreased, and the proportion of U.S. soybeans in China's soybean imports has dropped to 17%.

"However, the large number of products involved this time will add further difficulties to China's aquatic product exports to the U.S., especially tilapia exports. With the additional 10% tariff, the tariff on tilapia exports to the U.S. will reach 45%, making it basically impossible to export to the U.S."

Source: Reuters