Understanding corn tariffs – China tacks on 26% and 90% | Michigan Farm News

Understanding corn tariffs – China tacks on 26% and 90%

Category: Markets & Weather

by Megan Nelson, AFBF Economic Analyst; Farm News Media

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China, which utilizes tariff-rate quotas for corn, had been charging a 1 percent tariff on a limited quantity of U.S. corn imports, and 65 percent on all other corn imports exceeding the quota. With the retaliatory tariffs in place, China is now imposing a tariff of 26 percent for in-quota imports, and 90 percent for out-of-quota U.S. corn imports

As the world’s top corn producer, U.S. farmers produce 29 percent of the world’s corn supply. In 2017, the U.S. exported $9.1 billion in direct corn exports and imported $274 million in corn, creating a net trade balance on corn of $8.8 billion.

The U.S. charges a 0 percent tariff to all free trade agreement partners in the World Trade Organization (WTO). Like tariffs on wheat, China traditionally utilized tariff-rate quotas for corn. China charges a 1 percent tariff on a limited quantity of corn coming into the country then, after the quota is met, all other corn imports are charged a 65 percent tariff.

However, with the retaliatory tariffs in place right now, China is imposing a tariff of 26 percent for U.S. corn imports that are in quota, and 90 percent for corn imports that are out of quota.

Mexico is the largest customer of U.S. corn, purchasing $2.7 billion in 2017. Like wheat and soybean exports, due to the North American Free Trade Agreement, the U.S. is charged a 0 percent tariff on corn into Mexico. Our competitors are subject to a 4 percent tariff.

The second-largest customer of U.S. corn is Japan, charging a 0 percent tariff and purchasing $2.1 billion worth of corn in 2017. The U.S.-Korea Free Trade Agreement guarantees that U.S. corn exported to Korea is charged a 0 percent tariff instead of a 428.7 percent tariff.

In 2017, the U.S. exported $781 million in corn to Korea, which made South Korea the fourth largest destination for U.S. corn. Figure 1 highlights these points and more.

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