China slaps tariff on US ethanol in response to Trump tariffs

trump tariffs
In response to Trump tariffs on steel and aluminum imports, China is immediately adding an extra 15 per cent tariff on US ethanol imports. photo.

In response to Trump tariffs on steel and aluminum imports, China is immediately adding an extra 15 per cent tariff on US ethanol imports. photo.

China responds to Trump tariffs on steel and aluminum imports

Reuters reports that US ethanol imports into China will be more expensive due to higher tariffs imposed by Beijing in response to US tariffs recently imposed by the Trump administration on steel and aluminum imports.

On Sunday, China announced it will add an extra 15 per cent on ethanol imports from the US, up from the previous 30 per cent.  The increase will neutralize cost savings buyers enjoyed by importing cheaper US ethanol compared to domestic supply.

The move will likely force ethanol buyers to find other overseas markets to meet the Chinese government’s rising targets for ethanol use as the part of China’s program to reduce pollution.

“The price difference is gone. We will suspend imports for now,” a manager at a private oil refinery told Reuters.  The official said he may instead use domestically produced ethanol to blend into gasoline.

Chinese ethanol producers are pleased with the tariff.  Many producers are boosting their output thanks to government subsidies and falling corn prices.

“We have so much corn. We will do absolutely fine if we don’t import ethanol,” a manager at a major ethanol producer in China told Reuters.

But many analysts say that China will have to resort to imports as domestic production will not likely meet Beijing’s demand that all gasoline in China be blended with 10 per cent ethanol by 2020.

“Demand for fuel ethanol will potentially explode in 2019 and 2020 and we won’t have enough domestic supplies by then. We might have to turn to overseas,” Michael Mao, an analyst with Zhuochuang, a commodities consultancy told Reuters.

Last year, China expected its new ethanol regulation would increase industrial demand for corn.  Consumption of ethanol is set to rise to about 15 million tonnes of ethanol which would be made from 45 million tonnes of corn.

Currently, China produces about 2.5 million tonnes of ethanol per year.

According to Reuters, it is unclear where future imports of ethanol will come from as the previously imposed 30 per cent tariff on imported ethanol cut trade drastically.

US exports of ethanol only recently increased after prices fell enough to be attractive to buyers, even with the higher duties.  But, with the higher tariffs on US ethanol, prices are now about 6,300 yuan per tonne, after taxes which is on par with domestic prices.

Prices for ethanol produced in Brazil are too high for exports to China, according to the refinery manager.  But, with the mandate on ethanol use looming, imports from Brazil could be an option in the coming year.

China also imposed tariffs on $3 billion worth of US imports, including products ranging from pork, meat and fruit to steel pipes.





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