China scraps levy on US sorghum imports amid trade war talks

Analysts say it amounts to a goodwill gesture amid negotiations in Washington between the two nations aimed at resolving their increasingly volatile trade disputes

PUBLISHED : Friday, 18 May, 2018, 11:25am
UPDATED : Friday, 18 May, 2018, 10:32pm

China has dropped an anti-dumping levy it imposed a month ago on US sorghum imports amid talks between the two countries to try to avert a trade war.

A notice by the Chinese Commerce Ministry said the anti-dumping duty of 178.6 per cent imposed on April 18 has increased costs for consumers and was against the public interest. 

Many pig farmers faced operational difficulties after the levies were imposed and the ministry has decided to drop them, the notice said. One of the main uses of the grain is for animal feed.

China imposed the preliminary anti-dumping tariffs on US sorghum after US President Donald Trump threatened to raise tariffs on Chinese imports amid the two countries’ escalating trade dispute. 

China ‘offers Trump US$200 billion cut in trade surplus’ 

The US shipped 4.76 million tonnes of sorghum to China in 2017, the bulk of China’s roughly five million tonnes of imports of the grain that year, according to Chinese customs data. The value of the imports was roughly US$1.1 billion.

US sorghum farmers feared they would lose their biggest export market if China pursued tariffs on their crops.

The commerce ministry’s announcement came as Chinese Vice-Premier Liu He is in Washington for talks with US officials, led by Treasury Secretary Steven Mnuchin, to contain tensions over China’s massive trade surplus with the US.

Liu met with US President Donald Trump on Thursday and said the two countries needed to properly resolve their trade disputes in an equal and mutually beneficial way.

Xi Jinping says ‘China can come out of trade war in better shape than US’

“China is willing to work with the US to properly resolve economic and trade issues that concern both nations in an equal and mutually beneficial manner,” Liu was quoted by Xinhua as saying. “Both sides should ensure economic and trade cooperation continue to be the driver of Sino-US relations.”

Yan Zhang, ana analyst at Shanghai JC Intelligence Co, said the removal of the levy was a “gesture from the Chinese side”.

Some of the cargoes that were heading to China were resold at discounts of 30 per cent to 40 per cent, incurring huge losses for domestic companies, she said, adding China may also consider removing its tariff on US distillers’ dried grains.

A private sorghum trader who had over 600 tonnes of US sorghum stranded at a Chinese port said the ministry announcement was welcome news.

“We will clear our goods immediately today,” the trader said.

For many, however, the damage has been done. US food processing company Archer Daniels Midland warned earlier this month it would take a US$30 million hit to trading profit due to the dispute.

The anti-dumping investigation showed how much financial pain China could inflict on US farmers, analysts said.

“China has taught a lesson to the United States and showed how it can hurt US exports,” said Ole Houe, director of advisory services at brokerage IKON Commodities in Sydney.

“Now they are showing goodwill by halting its anti-dumping investigation into sorghum imports, but it is a cheap way of showing goodwill as the US does not have much sorghum left to export. The next US sorghum crop will be harvested in August.”

Additional reporting by Reuters and Bloomberg