New Chinese tariffs will force Canada to defend against U.S. competition: producers - InfoNews

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New Chinese tariffs will force Canada to defend against U.S. competition: producers

In this Tuesday, July 11, 2017, photo, East Arkansas farmer Reed Storey shows the damage to one of his soybean plants in Marvell, Ark. Canada's soybean producers say China's expanded list of tariffs applied on U.S. products will cause global disruptions and uncertainty. THE CANADIAN PRESS/AP-Andrew DeMillo
April 05, 2018 - 5:23 AM

MONTREAL - New Chinese retaliatory tariffs on U.S. goods will cause global disruptions and force Canadians to defend their markets against heightened American competition, say soybean, meat and chemical producers.

China announced tariffs Wednesday against U.S. plans to apply US$50 billion worth of tariffs on 106 imports by issuing a list of U.S. goods including soybeans, whisky, beef, industrial chemicals and small aircraft in the escalating dispute.

That's on top of import charges announced Monday on 128 items including fruit, nuts, pork, ginseng, wine, steel pipe and aluminum scrap in retaliation for an estimated US$3 billion in U.S. tariffs on steel and aluminum.

The latest 25 per cent levy on U.S. goods could create some opportunities for Canadian soy exporters, but will also force Canada to fend off imports at home and defend sales to 69 other markets, said Soy Canada executive director Ron Davidson.

"What we're looking at here is substantive instability in the world market while we try to sort out where everybody's beans are going," he said in an interview.

Canada sold nearly five million tonnes of soybean products valued at $2.7 billion to China last year.

It is the country's largest export market, but Canada is a small player compared with global leaders like Brazil, the United States and Argentina.

Brazil supplied about half of the nearly 100 million tonnes of soybean imported by China last year. The U.S. shipped some 33 million tonnes.

The Chemical Industry Association of Canada said the country's producers will likely suffer a "secondary impact" by seeing more U.S. products in markets where they compete.

David Podruzny, vice-president business and economics at the association, said the impact will take awhile because most of the production is under contract.

About four per cent of the $35.4 billion of Canadian industrial chemicals exports go the China.

Canadian producers can't automatically replace American products, but if the material is the same, multinational companies might try to relocate their production destined for China to escape U.S. duties, Podruzny added.

"If it's all above board we could easily benefit in that circumstance," he said.

The group representing Canada's beef and pork producers sees big growth opportunities in China and Asia but said a ramp down of American exports to China would boost competition in other markets.

"The tariff certainly changes the landscape a little bit but China still remains a very viable market for Canadian exports," said Marcus Mattinson, spokesman for the Canadian Meat Council.

Canadian red meat exports to China surged to $835 million in 2016, up from $334 million in 2010.

A pilot project announced in December that would allow China to accept Canadian chilled beef and pork provides another window of opportunity for Canadian producers, he added.

On top of that, the rebooted Trans-Pacific Partnership could facilitate the enhanced penetration into Pacific Rim countries.

Meanwhile, Davidson said replacing U.S. soybeans will be challenging because Canada doesn't have the extra volume even though it is the fastest-growing field crop in the country.

Some Manitoba soybeans are available for export, but they're being held up by a rail backlog that has slowed transportation of western grain.

Greg Colman of National Bank Financial said the tariffs against U.S. goods could increase demand for agriculture from other countries.

"The likely outcome for Canadian farms is mildly positive, as the 25 per cent tariff enhances the competitiveness of farms in the rest of the world," he wrote in a report.

Seth Seifman of J.P. Morgan says the Chinese tariff on aircraft weighing between 15 and 45 tonnes is calibrated to send a political message without have a major impact on Boeing.

"In other words, this looks like a shot across the bow with regard to Boeing and our base case remains that we will see little change in Boeing aircraft deliveries into China," he wrote in a report.

In a statement, Boeing said proposed tariffs from the U.S. and China could harm the global aerospace industry.

"A strong and vibrant aerospace industry is important to the economic prosperity and national security of both countries."

Follow @RossMarowits on Twitter.

News from © The Canadian Press, 2018
The Canadian Press

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