In
the current trade dispute between China and the USA, President Donald Trump has
tried to avoid tariffs that would hit the common American consumer in the
wallet. This was shown during the measures in January to March 2018, where the
government took high care to exclude most of the consumer electronics in
increased tariffs on Chinese commodities. However, in early April, Trump
ordered more taxes on Chinese goods worth USD100 billion.
With
the newly announced tariffs in this high financial dimension, it becomes
unavoidable that the common US consumers will be affected by price rises.
Especially new tariffs on consumer electronic devices would hit the domestic
American market hard. More notably, there are hardly any alternative sources of
supply for many electronic products from China.
The
USA exported more than USD12 billion worth of soybeans to China last year
alone. The agricultural sector is one of the US sectors where the Beijing
government is threatened with retaliation if Trump levies additional duties in
addition to steel and aluminium. That could be tough on the people in the rural
areas like states as North Dakota, Kansas and Iowa. In some of them, polls see
a narrow voting behaviour that could slip Republican Senate and House of
Representatives. If the Democrats win one of the two chambers, they could block
large parts of Trump's program.
The
China-US trade war is heating up, but both sides have not yet implemented any
substantial actions on tariff levying. The USA extends the Tax Day to May 22.
However, the tariff lists issued by the two have aroused great attention from
all walks of life, and the agrochemical industry is no exception. CCM believes
that the trade war means challenges and opportunities for China's agrochemical
industry.
Domestic
pesticide formulation business of agrochemical enterprises such as Zhejiang
Wynca and Hubei Sanonda will get benefited if China starts levying tariffs on
American products. In the meantime, some will be negatively affected such as
Lier Chemical and Shandong Weifang because they mainly supply pesticides into
the USA.
China-US
trade war spurs agricultural produce prices, which is good news for the
agrochemical market. China is the major agricultural produce importer from the
US. On 4 April, the MOC announced that it has decided to impose an additional
tariff of 25% on agricultural produce including soybean, corn and sorghum
imported from the US. This is expected to benefit pesticide formulation
enterprises. Affected by rising raw material cost or dropping export, industry
reform and layout may be accelerated for the long run.
Notably,
pesticides with large export amount into the US attract attention, namely
glyphosate, glufosinate-ammonium, clethodim and atrazine. Although these
products are not on the tariff list, they will be indirectly affected in a way.
In addition, some pesticide raw materials, pesticide formulations and some
insecticides will be levied an additional tariff, which may leave some markets
to other products.
America's
elites surely have the big picture of the trade dispute in mind. After all,
it's not about a few tariffs, not even about intellectual property, which they
have long since given away in the interests of their own profits. I might be
more about the supremacy in the world. China has become big and the ruling
circles on Wall Street have long thought they could conquer China with their
capital, just as they did everywhere after the Second World War and after the
end of the Bretton Woods system. This path does not seem to work in the case of
China.
Trump's
move may be the last attempt in that direction, but it does not say much that
he succeeds. China will probably make some concessions, but nothing more. It
certainly will not open its borders to unhindered capital movements. It may be
possible to establish a kind of coexistence, in that both sides to a certain
extent establish a reasonably fair trade.
About the article
The
information for this article comes from CCM, China's leading market
intelligence provider for the fields of agriculture, chemicals, food and feed.
Stay
updated on the effects of the US-China trade dispute to be the first one to
react to market changes and be the leader, not a follower. Have a look at
CCM's monthly published reports about China's agricultural and agrochemicals
market.
Take
part in the discussion by joining our groups on LinkedIn and Facebook.
Follow
CCM on Twitter: @CCM_Kcomber