China-US trade dispute turned sour for cherry traders weeks ago, Shanghai dealer says

Customs clearance and checking process that used to take hours now takes weeks, businessman says

PUBLISHED : Friday, 06 July, 2018, 6:01pm
UPDATED : Friday, 06 July, 2018, 11:42pm

The so-called trade war between the world’s two largest economies might have officially started on Friday, but for Chinese importers of American cherries, the impact of the long-running dispute has been rumbling through the sector for weeks.

One of the biggest problems for a trader in Shanghai has been the tardiness of customs officials in processing shipments.

At the city’s Yangshan Port and Pudong Airport, it now took between 10 days and two weeks for cargoes of cherries from the US to be cleared, the person, who asked not to be named, told the South China Morning Post.

“Normally it should take three to four hours for customs clearance, with just selective checks, but with the trade tensions it has been taking much longer,” he said.

“The inspection process has also become much tighter, with each batch of goods being subjected to checks, for various reasons, including fungi inspections.”

Washington on Friday made good on its threat to impose 25 per cent tariffs on US$34 billion worth of goods its imports from China. In Beijing, the foreign ministry said it had hit back with punitive tariffs on an equivalent amount of US goods.

As the value of China’s imports of American products is far lower than that of the goods it sells to the US, a tit-for-tat tariff-only dispute is not in Beijing’s interests. As a result, the use of regulatory and administrative measures to disrupt US trade has long been touted as a weapon in China’s arsenal.

Such barriers have already been imposed to slow up the delivery of gear parts for a US-branded new-energy vehicle, with the goods now sitting idle in warehouses in the north China port of Qinghuangdao, according to a foreign company representative.

China fears Europe will ‘stab it in the back’ as trade conflict with US escalates

Other observers have said that US pharmaceutical companies might soon be subjected to longer review periods, while American producers of genetically modified products are likely to have to go through a much lengthier process than their European rivals to secure the licences they need.

“A simple point is that the intrusive reach of China’s regulatory state, which largely operates free of strict procedural constraints, means that virtually any sector and any company can be effectively targeted if officials so desire,” Xie Yanmei, an economist with Gavekal Dragonomics, said.

“Lower-level officials could see it as their patriotic duty to make life hard for American companies even without instructions from the central government,” she said in a report released last week.

Cherries are just one of a number of agricultural products targeted by Beijing in a move possibly designed to undermine US President Donald Trump’s support base ahead of the midterm elections in November, observers said.

Soybeans, beef and whiskey are also on the list, for similar reasons, they said.

The Shanghai cherry importer said he had already told his customers he would be raising his prices by 40 to 50 yuan (US$6-7.50) per kilogram, or about 25 per cent, to offset the higher tariffs.

European businesses in China are ‘hurting’ from Donald Trump’s trade war threats, EU chamber says

Since trade tensions escalated in May, many of his competitors had severed their ties with US business partners and had even had advance payments refunded, he said.

As more than half of all US cherry exports ended up in China, the losses to American farmers would be huge, he said.

The trader said he had shifted his supply chain to central Asia, including Uzbekistan and Kyrgyzstan, as “customs clearance and quarantine inspection are much simpler and quicker at ports along the route of China’s ‘Belt and Road Initiative’”.

As well as creating barriers to the trade in goods, observers said it was likely that Beijing would introduce unwritten rules to delay the approval of takeover deals, opening of new factories or release of new models by American companies.

Sources told the Post that the US embassy had warned American firms to be “prepared for pain”, at least in the short term.

US-China trade dispute: who wins, who loses

Jake Parker, vice-president of China operations at the US-China Business Council, said the impact of the new tariffs would differ from business to business. Those that had the option to find new suppliers were likely to do so, while others would have to either take a cut in margins or pass the higher costs on to their customers.

“At this stage, however, the biggest thing is uncertainty, and the impact of that is already being felt,” he said.

“Businesses hate uncertainty. If you are uncertain, you don’t invest; if you are uncertain, you don’t hire. Companies don’t know how big this may get, or how it will end.”

An executive from a European chemical company said it had relocated part of its supply chain to South Korea from the US.

“The trade war will affect the world’s supply chain, and will ultimately hit the global economy,” he said.

China looks to replace US farm goods as trade row turns sour

William Zarit, chairman of the American Chamber of Commerce in China, urged Washington and Beijing to return to the negotiating table, rather than trading tariffs.

“There are no winners in a trade war. Counterproductive import tariffs, such as these, hurt not only the economies of the US and China, but those of every country around the world,” he said.

“While our 900 member companies continue to suffer from not having a level playing field in China, they are still extremely clear: increased tensions in the US-China economic relationship will negatively affect their operations.

“We urge the two governments to come back to the negotiation table with the aim of having productive discussions based on achieving results – focused on fairness and reciprocal treatment – instead of escalating the current situation.”