After President Trump's March 22 announcement of new tariffs on Chinese steel and aluminum imports, the Asian nation struck back by saying it plans to put a 25% tariff on U.S. pork imports, according to Bloomberg. It is also looking at other items on which to add the import tax, including fruit and soybeans.
China said it wasn't afraid of a trade war with the U.S. and that it would reciprocate by placing tariffs worth $3 billion on U.S. imports. It also plans to take the dispute to the World Trade Organization for a resolution.
According to an AP story in Time, China calculates that two-thirds of its global trade surplus is with the U.S. — about $275.8 billion. The U.S. puts its trade deficit with China at a record $375.2 billion.
It's hard to tell how serious this initial skirmish might become, or whether it will blow up into a real trade war. Given the importance of both countries' markets to one another, it's likely to be settled before long, and China's stated intention to take the dispute to the World Trade Organization signals that it's more interested in talking than fighting.
However, U.S. pork producers and soybean growers are undoubtedly concerned as the tariff proposals fly back and forth between the two nations. It also doesn't help that President Trump has now temporarily exempted six other countries and the European Union from the metal tariffs — all the ones on his list except China. In response, the three major U.S. stock indices tumbled on Thursday, closing with a more than 2% decline, Bloomberg reported.
According to the U.S. Meat Export Federation, U.S. pork exports in 2017 hit a record 2.45 metric tons, which was 6% higher than the 2016 record. The value of U.S. pork exports was $6.49 billion, which was a 9% increase from 2016 and close behind the 2014 record of $6.65 billion.
Although the U.S. pork markets rely heavily on exports, this particular action may not harm them too deeply. China, the world's No. 1 pork consumer, has seen a reduced need for imports because its domestic hog prices are slumping. As a result, Smithfield, the top U.S. pork producer, has had to seek customers elsewhere, according to Reuters, and is exporting more pork products to Mexico, Japan and South Korea.
What may cause more harm are potential tariffs on U.S. soybeans, which are used to feed Chinese hogs. China has been studying the impact of trade measures on the imported commodity, which was worth $13.9 billion last year, Bloomberg recently reported. China is the U.S.' largest international market for soybeans, and the crop is a major part of farming economies in many of the states that voted for Trump in 2016.
The dispute is being characterized as a tit-for-tat dynamic that could resolve itself in time if both sides keep negotiating and don't solidify their positions. Both countries have plenty to lose, especially the U.S. with its massive trade deficit with China — along with manufacturers worldwide that would inevitably feel the sting if such huge trading partners hit gridlock.