29 May 2019- US producers of feed ingredients are gearing up for the imposition of new tariffs on exports to China, set to be levied on June 1st after President Donald Trump chose to reignite the trade war earlier this month.

Background: Tariffs on Chinese exports to the US

The administration first applied tariffs worth 10% on this list (the so-called “list 3”) of items which collectively represented USD 200 billion worth of trade in mid-September of 2018, promising an increase to 25% by the end of the year. That increase was postponed in December, and again in March. President Trump announced via Twitter on May 5 that this delay in increasing tariffs to 25% would end, and the new higher rate took effect May 10.

Among the feed additives figuring on this list include methionine (and dl-hydroxy analog of dl-methionine) and preparations of vitamin 12. Other chemicals subject to these tariffs with some feed applications include calcium phosphates, copper sulfate, zinc sulfate, and sodium bicarbonate.

Finally, the list includes items such as pet food for retail, mixed feed ingredients, and other preparations “of a kind used in animal feeding, not cont[aining] milk or egg prod[ucts].”

A full list (“list 3”) of products affected by the May 10th increase is available in pdf form below. It follows two tariff increases directed at smaller lists of imports, on July 6th and August 23rd, 2018.

Now: tariffs on US exports to China

Ratcheted up in response to President Trump’s actions earlier this month, China’s tariffs are estimated to affect USD 60 billion worth of goods, and it is understood that they will tack on an additional burden of between 5% and 25%, depending on the category of goods. In the words of AFIA’s Gina Tumbarello, the resulting tariff increases will be as follows:

“U.S. fishmeal to China, for example, will go from 10% to 25%, putting the new effective tariff rate at a whopping 45%.

“Animal protein meals will go from 5% to 10%, putting the new effective tariff rate at 15%.

“Other feed ingredients that fall under the 23099090 and 23099010 tariff codes will go from 5% to 10%, putting the new effective tariff rate at 14% and 15% respectively.”

Of course, this is just the current round; previous rounds of back-and-forth between the world’s largest feed producers have affected the industry as well as its suppliers and customers. “The U.S. pork industry has been one of the most adversely affected sectors, receiving a one-two punch in the form of a 50 percent punitive tariff from China on top of the existing 12 percent duty…” observed David Herring, president of the National Pork Producers Council (NPPC), representing US producers; meanwhile, US dairy exports to China dropped by half year on year. Among the worst hit sectors was that of soybeans; China’s imports of US-sourced soy dropped 80% since last summer’s tariffs took effect, leaving prices low and contributing to unprecedented stock levels.

What’s next?

President Trump has directed the US Trade Representative’s office to “begin the process of raising tariffs on essentially all remaining imports from China, which are valued at approximately $300 billion.” A hearing on these across-the-board increases will take place on June 17th, and written comments are also being accepted until that time. It is understood that the decision on whether to levy these has not yet been finalized.

According to the observations of Feedinfo’s own pricing analysts, the market as a whole appears to be in a wait-and-see mode regarding the direct effects these latest escalations will have. “Right now, everybody is guessing and speculating still,” said one.