China Begins Tariffs on $3 Billion in Goods; Pork Biggest Target

China raised tariffs on April 2 on all 128 U.S. products it identified in recent weeks after saying it would implement the safeguard tariffs in two phases (see 1803230008). Scrap aluminum and pork is now subject to a 15 percent tariff, while six other higher volume exports will be subject to 25 percent tariffs. "There are multiple commodities that will be affected by the trade war that’s starting," said Randy Goodman, executive vice president of scrap metal trading firm Greenland America.

According to an informal translation of a Chinese announcement on Sunday, the Chinese Customs Department said that U.S. tariffs on steel and aluminum "violated the relevant rules of the World Trade Organization and did not comply with the 'security exceptions' provision." Since the Chinese government sees the 25 percent tariff on imported steel and the 10 percent tariff on aluminum as a safeguard measure, it notified the U.S. it would also be taking safeguard measures.

"On March 26, the Chinese side submitted a trade compensation consultation request to the United States in accordance with the 'Agreement on Safeguards', and the United States refused to reply," a spokesman for the Ministry of Commerce said April 2. "It is hoped that the United States will withdraw the measures that violate the rules of the WTO as soon as possible, so that the trade of related products between China and the United States will return to normal track. As the two largest economies in the world, cooperation between China and the United States is the only correct choice."

Prices of shredded automobiles and appliance material, known as 'Zorba' in the business, was already on the decline because of a separate policy China was implementing on increasing purity standards for imported recycled materials, Goodman said. But even as traders look for new customers for Zorba, and its more processed cousin, "twitch," this tariff is going to bite. "Of the aluminum we’re doing, probably more than 50 percent of it is going to be affected, maybe 75 percent of it, the effect of it we’re still trying to figure out," he said April 2 in a telephone interview from Atlanta.

There may be a silver lining for the trade, which is that he believes aluminum scrap processors that make ingots for export will get the duties refunded at the time of export. He said that 51 percent "of all the Zorba and twitch brought into China is then exported as finished ingot to Japan and other countries for the auto industry." Goodman said Greenland has aluminum scrap on the water right now that will be hit by the tariffs when it gets to China. Even though the processors already agreed to a price that didn't include the 25 percent tariff, Greenland will not hold them to it. He said the parties will either share costs, or come up with an alternative destination.

The Institute of Scrap Recycling Industries, where Goodman is a board member, says that the U.S. exported $2.34 billion in aluminum scrap in 2017, and about half of those exports went to China. The 820,000 metric tons of aluminum scrap bought by Chinese businesses made up about 50 percent of Chinese aluminum scrap imports.

National Pork Producers Council CEO Neil Dierks released a statement that said: "Last year, nearly $6.5 billion of U.S. pork was exported, which was more than 26 percent of U.S. pork production." China bought $1.1 billion of those exports last year. "We recognize that the U.S. and China are negotiating, and we are hopeful that the 25 percent tariffs on U.S. pork will be short lived." Goodman, too, expressed hope that a trade war can still be averted. "There are back-door conversations between the U.S. and China already," he said.