China’s retaliatory tariffs on U.S. wheat take a hike | Michigan Farm News

China’s retaliatory tariffs on U.S. wheat take a hike

Category: Markets & Weather

by Megan Nelson, AFBF Economic Analyst; Farm News Media

Wheat Harvest Sept_MFN_2018
U.S. exports of wheat to China reached $351 million in 2017, making that country our fifth largest customer. Mexico is the largest customer of U.S. wheat, importing $855 million in worth in 2017, followed by Japan, accounting for an additional $713 million in wheat export business.

As is the case with U.S. corn imports, China also employs a tariff-rate quota system for wheat imports. Prior to the launch of the retaliatory tariff battle between the two countries, China charged a 1 percent tariff on a limited quantity of wheat coming into the country, with all other wheat imports charged a 65 percent tariff once the quota is exceeded.

However, with the retaliatory tariffs in place right now, those tariff limits took a significant jump, with the U.S. being charged 26 percent for wheat imports that are in-quota, and 90 percent for wheat imports that are out-of-quota.

U.S. wheat producers exported $351 million in wheat to China in 2017, making the country the fifth-largest U.S. customer. Mexico is the largest customer of U.S. wheat, importing $855 million in worth in 2017, followed by Japan, which imported $713 million worth.

With the North American Free Trade Agreement in place, the $855 million to Mexico and $17 million to Canada was charged a zero percent tariff. Our competitors, on the other hand, are subject to a 24.5 percent tariff on wheat to Canada and a 15 percent tariff to Mexico.

Similar to NAFTA, the U.S.-Korea Free Trade Agreement, ensures that the $328 million in U.S. wheat purchased by South Korea in 2017 was charged a 3 percent tariff instead of the standard 9 percent tariff. The second-largest customer of U.S. wheat is Japan, charging a 0 percent tariff and purchasing $713 million worth of wheat in 2017.

Overall, the U.S. maintains a net trade balance on wheat of over $5.3 billion. As the second-largest exporter of wheat, the U.S. exported $6 billion in wheat and imported $687 million worth of the commodity in 2017.

The U.S. charges a zero percent tariff to all free trade agreement partners and charges a $0.65/kg tariff for all non-free trade agreement partners in the World Trade Organization.

Wheat Tariff Profile_MFN_2018
Click to enlarge.