China Center for International Economic Exchanges

Chen Wenling: the impact of China’s counter-measures against the US on Chinese consumers is under control
Date:Jul 16,2018    Source:CCIEE

At present, the tariffs on Chinese goods imposed by the United States mainly affect China’s manufacturing industry and has little effect on the Chinese people because the production prices of these industries are not much related to the daily lives of the Chinese people. More details can be described as follows.

First of all, the price of soybeans. In recent years, China’s imports of soybeans from the United States has declined. In 2017, the proportion of soybeans imported from the United States fell to 31%, while Brazil has become the largest soybeans-exporter of China. From January to May of this year, China’s imports of soybeans from the United States fell by 26% compared with the same period of last year because of the expected trade conflict between China and the United States. Therefore, the share of soybeans imported from the United States is now less than one third of China’s total. Furthermore, the US soybeans can only be used for oil extraction in China, which may increase the price of soybean oil. Currently, China has to pay $ 3,750 for one ton of soybeans, $750 more than the before, which might lead to an increase of a few dollars on the price of soybean oil but this will have little effect on the lives of Chinese people.

Secondly, the price of cars. There are three major US car exporters in China: GM, Ford, and Tesla. Every year, China imports 500,000 to 600,000 vehicles with the total value between 15 and 18 billion US dollar. China produces and sells more than 250 million cars annually and thus the share of the US cars is relatively small. Moreover, Chinese customers can easily find an alternative for the US cars. Recently, China has reduced the automobile tariffs from 40% to 15%. In other words, if a car worth 1 million yuan, the imported US cars will be 250,000 RMB more expensive and consequently, consumers will definitely choose alternative products.

Last but not least, the price of pork. In 2017, China imported more than 1.2 million tons of pork, accounting for 13.6% of the US total exports. Last year, the price of imported pork was between 10 yuan and 11 yuan per kilogram. After the tariff was added this year, it was more than 17 yuan per kilogram, which may have some influence on people’s daily life but they can choose to eat more beef, lamb, chicken and fish.

In summary, the counter-measures against of the United States adopted by China will have less impact on Chinese consumers than the US producers for three reasons.

First of all, the trade war has a great negative impact on the US soybean farmers, which is why they are strongly against the trade war. Secondly, the trade war has adversely affected American automakers. Thirdly, the trade war has increased the export costs of the US pork producers and reduced their competitiveness. Therefore, the first round of counter-measures launched by China will have a greater impact on American society and consumers, while the impact on Chinese consumers is under good control.

If China adds tariffs on US$16 billion of US goods, it will hurt the US oil and gas industry so badly because 108 of the 114 categories of products subject to China’s tariffs are oil and gas products. The United States is about to become the largest oil exporter, China is the world’s largest oil consumer and thus, the US oil and gas will be more expensive and less competitive if China imposes a 25% tariff on the US oil and gas. For the US oil and gas companies, this means that they will lose a huge market, China.

The tariffs which will be imposed by the United States in the next round is the high-tech industry of China, which is likely to affect China’s manufacturing industry the most, not the consumers. Therefore, the general public does not have to panic about the current China-US trade frictions. However, technological innovation, core technology, heavy equipment and manufacturing boom cycle should be our top priority.

 

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