China drops US sorghum dumping probe amid signs of trade thaw

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China said on Friday it was dropping an anti-dumping probe into imports of U.S. sorghum, a conciliatory gesture as top officials meet in Washington in an effort to head off a trade war between the world’s two biggest economies.

Beijing’s announcement that it was ending its investigation, which effectively halted a trade worth roughly $1.1 billion last year, came hours after U.S. officials familiar with the matter said China was offering a package to slash the U.S. trade deficit by up to $200 billion.

“The imposition of anti-dumping and anti-subsidy measures on imports of sorghum originating from the United States would have a widespread impact on consumer living costs, and does not
accord with the public interest,” China’s Commerce Ministry said in a statement.

News of China’s offer of trade concessions and increased purchases of American goods came during the first of two days of U.S.-China trade talks in Washington focused on resolving tariff threats between the two countries. However, it was not immediately clear how the total value was determined.

One of the U.S. sources said U.S. aircraft maker Boeing Co would be a major beneficiary of the Chinese offer to narrow the trade gap if Trump were to accept it. Boeing is the largest U.S. exporter and already sells about a quarter of its commercial aircraft to Chinese customers.

Another person familiar with the talks said the package may include some elimination of Chinese tariffs already in place on about $4 billion worth of U.S. farm products including fruit,
nuts, pork, wine and sorghum.

A White House statement described the meetings as part of “ongoing trade discussions” and said Trump met the Chinese delegation led by Vice Premier Liu He and the U.S. team led by
Treasury Secretary Steven Mnuchin.

“The United States officials conveyed the President’s clear goal for a fair trading relationship with China,” the White House said.

The top-line number in the Chinese offer would largely match a request presented to Chinese officials by Trump administration officials in Beijing two weeks ago.

But getting to a $200 billion reduction of the U.S. China trade deficit on a sustainable basis would require a massive change in the composition of trade between the two countries.

The U.S. goods deficit was $375 billion last year. The United States’ two biggest exports to China were aircraft at $16 billion last year, and soybeans, at $12 billion.

Sorghum surprise

The United States shipped 4.76 million tonnes of sorghum to China in 2017, worth around $1.1 billion, accounting for the bulk of Chinese imports of the grain used in animal feed and Chinese liquor.

In April, China forced U.S. sorghum exporters to put up a 178.6 percent deposit on the value of sorghum shipments to the country after launching an investigation in February following Trump’s imposition of steep tariffs on imports of solar panels and washing machines.

“China has taught a lesson to the United States and showed how it can hurt U.S. 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 U.S. doesn’t have much sorghum left to export. The next U.S. sorghum crop will be harvested in August,” Houe said.

Some China trade watchers expressed scepticism that a $200 billion reduction in the trade gap could be achieved quickly and said the offer may include repackaged commitments previously
announced by China.

“That’s an enormous number and it suggests that there could be some impressively ambitious accounting,” said Scott Mulhauser, a former chief of staff at the U.S. Embassy in Beijing and U.S. Export-Import Bank official who now advises companies on trade issues.

Agreeing to a deal focused primarily on reducing the trade deficit could also weaken Trump’s original tariff goal of pressuring China to end policies that his administration says are aimed at misappropriating U.S. technology – a bigger structural change for China’s state-driven economic model.

The U.S. officials did not have details on China’s demands in exchange for the concessions.

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