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China Adds U.S. Cotton to Proposed Tariff List

China Adds U.S. Cotton to Proposed Tariff List

In response to the United States’ proposed tariffs on Chinese goods, the Chinese Ministry of Commerce has announced its plan to impose a 25% tariff on 106 U.S. goods, including agricultural products such as cotton, soybean, corn and beef.

The effect of the Chinese tariff is expected to impact exports worth about $50 billion from the United States.

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This proposed action may affect the entire U.S. cotton industry, as China imports a significant amount of U.S. cotton each year, along with other leading importers like Vietnam, Turkey, Indonesia and Pakistan. While previously thought that the tariff may not include U.S. cotton, the immediate reaction to today’s move is that the United States may move cotton out of the Chinese market due to the pricing issue.

The impact would be the dislocation of U.S. cotton and agricultural exports, which may likely harm U.S. farmers, stated Darren Hudson, professor and Combest Chair of Agricultural Competitiveness at Texas Tech University. More cotton would likely be pushed to Southeast Asia and away from China, he added.

(Editor’s note: The cotton market reacted to the tariff news from China, as Cotton #2 ICE Futures prices for the remainder of the 2017/18 marketing year and most of 2018/19 closed lower for the day.)

In March, President Trump proposed a 25% tariff on steel imports and 10% on aluminum imports, while exempting some countries. The move was aimed at protecting United States jobs and American innovation and its industry. At that time, the effect on the U.S. cotton industry was not perceived to be serious, as the most likely Chinese agricultural retaliation would target U.S. soybeans.