China hits fresh US crop in trade row

Sorghum exports from the US to China were worth US$2 billion ($2.7b) in 2015. Photo / 123RF

China has again lashed out at President Trump's political heartland in an attack on a major US farm crop. The move marks the latest tit-for-tat action following a block on Chinese Telecoms firm ZTE's importation of US components.

Beijing has slapped a tariff on all US sorghum imports as of Wednesday. The move is being painted as a "temporary anti-dumping measure" by the authorities in China. There will be a 179 per cent fee charged on all imports of the grain. The level of the fee is likely to be enough to halt US sorghum imports and up the prices of other grains.

Sorghum exports from the US to China were worth US$2 billion ($2.7b) in 2015. While that amount fell in 2016 and 2017, in the first three months of 2018 export levels had climbed by 30 per cent according to official US figures. China has historically bought close to 80 per cent of the US's sorghum crop, according to the Daily Telegraph.

The latest play in the trade spat between Beijing and Washington comes after China warned it would target soya beans, another politically sensitive US export on a list of more than 100 tariff targets.

The targeting of a fresh US crop comes after the US Commerce department's decision to impose a seven year ban on selling US parts for mobile phones and network equipment to the Chinese-state owned ZTE.

In other areas, such as the automotive industry, efforts to open up the Chinese economy to international firms are being welcomed. The German Economy Ministry said on Tuesday that it welcomed recent Chinese efforts to reduce barriers to foreign investors calling it "a signal in the right direction".

Beijing had followed through on a pledge to scrap limits on foreign ownership in key areas of industrial production such as shipbuilding, aircraft and automotive manufacturing.

China had previously imposed strict foreign ownership restrictions in 1994. These prevented foreign car makers from owning more than a 50 per cent share of a China-based company. The limit was intended to force automotive manufactures into partnerships with domestic firms.

Given Chinese sensitivities to air pollution the likely winners in the short term are expected to be car markers focused on low polluting options such as electric cars. This could include US firm Tesla.

Elon Musk, of Tesla, said last month that China's foreign ownership rules were unfair. The firm is currently in negotiations with officials on the likely terms they could strike on a deal for a manufacturing plant in Shanghai.

Trump's surprise speculation about the possibility of joining the Trans-Pacific Partnership trade agreement (TPP) was regarded as a "distant prospect" by the International Monetary Fund, according to its head of research, Maurice Obstfeld. The IMF has repeatedly warned against abandoning free trade principles.

However, while remote, the idea was still welcomed.

"Many of the TPP countries have very strong relationships with China. I would view it mainly as having positive impacts on the region which would have positive spillover effects for China," said Obstfeld.

Mike Bell of JP Morgan said the trade tensions were "like a WWE wrestling bout – there is an awful lot of talk but not a lot of damage to be done".

"I would suggest the most likely outcome is that we move to a world whereby China does a little bit more of what the US wants, and the US doesn't just continually escalate this," Bell added.

China's economy grew at an annual pace of 6.8 per cent according to its official data. This beat economists' expectations, and was above the regime's target of 6.5 per cent.

Official statistics from the world's second largest economy are believed to require close analysis, however.

Mark Williams of Capital Economics said there was likely to be "a weakening of economic momentum over coming months".