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Higher Chinese tariffs to hit US pork, food products

U.S. food products entering China will be hit with higher tariffs come June, dealing a new setback for pork producers and other parts of the U.S. food industry for whom Chinese consumption is key.

In the latest twist of the ongoing trade war, China will raise duties to up to 25% on $60 billion worth of U.S. products, including food items ranging from fruit juice to tapioca. Many of the products are currently subject to tariff hikes of 5% or 10%. The latest tariff hikes are due to take effect June 1.

The U.S. sent about $462.6 million worth of consumer-ready food exports to China in the first three months of 2019, according to data from the U.S. Agriculture Department's Foreign Agricultural Service, or FAS. By dollar value, food product exports to China are a much smaller category than soybean exports, which totaled $1.70 billion from January through March. The latest tariff increases announced May 14 do not apply to soybeans, but China already applies a tariff of 25% on them.

In terms of food exports to China, pork plays a starring role. The People's Republic has long been a destination for pork products, such as hooves and ears, that U.S. consumers do not usually eat. U.S. producers have found it difficult to sell these products anywhere outside of China.

Hog casings, or internal organs used to make sausage, and stomachs are among the items that will face higher duties as of June 1, according to a list from China's Ministry of Finance.

"The range of destinations for those items is pretty limited," Joe Schuele, vice president of communications for the U.S. Meat Export Federation, said in an interview. The trade group's members include Tyson Foods Inc. and Sysco Corp.'s international division.

Other U.S. products targeted by the latest tariffs from China include fruit juice, alcoholic beverages and frozen vegetables.

"Tariffs on juice products are detrimental to the U.S. juice industry and hurt consumers who enjoy quality American juice products," a spokeswoman for the Juice Products Association told S&P Global Market Intelligence.

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Pork and related products were the largest finished food product by dollar value that U.S. suppliers sent to China in the first three months of 2019, with a total export value of $138.2 million, according to FAS. U.S. pork exports to China declined in value by 20% over the same period one year earlier, reflecting a mix of shipment volume declines as well as lower prices for pork.

Shipments of dairy products, the next largest category by value, were worth $99.2 million for the first three months of 2019.

The latest tariffs from China add to existing duties, making it harder for U.S. producers to find willing buyers in the world's second-largest economy. China also implemented tariffs in April and July 2018 in response to duties that the U.S. placed on goods from China.

The tariff rate on most pork exports to China now stands at 62%, up from the 12% that applied before the trade spat began and that continue to apply to other countries selling pork to Chinese buyers.

That rate has made U.S. producers less competitive at a key time in China, Schuele told Market Intelligence. African swine fever has led Chinese pork producers to slaughter millions of hogs, which U.S. meat companies expect will raise prices for pork and other meats as Chinese buyers look abroad to fill the gap.

"The U.S. would normally be extremely well-positioned to meet" Chinese demand for pork in the wake of [swine fever], Schuele said. Tariffs on U.S. exports to China have made doing that more difficult, he added.