U.S.-China Trade War: Expect ‘Huge Impact’ from New Round of Tariffs

U.S. agrichemical companies will need to carefully consider alternate chemistries and sources to avoid hefty price hikes on Chinese imports, as the U.S.-China trade war rages on, Jim DeLisi, President of Fanwood Chemical, said during an AgriBusiness Global webinar held June 5.

U.S. customs began collecting a 10% tariff on $200 billion worth of imports in Tranche 3 on Sept. 24, 2018. A hike to 25%, which originally was set to happen on Jan. 1 but was delayed, will be imposed on all materials as of May 10. The 10% tariff will still apply, however, to materials that were in shipment on the water before May 24 and arrive in the U.S. before June 10.


Now, a new round of 25% tariffs is poised to come into force. The U.S. Trade Representative will begin public hearings beginning June 17 regarding the tariff on proposed Tranche 4 materials, which include four of the largest volume generic herbicides: glyphosate, glufosinate, dicamba, and 2,4-D.

“With Tranche 3 now at 25%, frankly, I think it’s a new ballgame. I don’t imagine that the Chinese companies can absorb 25%, so you are going to see some price increases, especially in products only available to the U.S. market from China,” he explained, adding, “Tranche 4, at least on the herbicide side, will have a huge impact.” (See the list.)

It’s important for companies to be wary of domestically produced active ingredients, he says. “If they are important in your supply chain, you need to ask yourself if there are significantly expensive intermediates for those finished products that are imported from China … The price increases are going to have to come through somehow.”

A meeting between China President Xi Jinping and U.S. President Donald Trump, set for later in June, could result in an end to the trade war, nullifying the Tranche 4 tariffs. If a deal is not reached, tariffs on Tranche 4 materials would likely come into play no later than July 31, DeLisi said. “But, if the Presidents have a good meeting at the end of June, none of this will happen.”

Agrichemical imports to the U.S. from China have taken a slight hit since the Tranche 3 tariffs took effect, but DeLisi largely attributes this to the March 21 Tianjiayi pesticide plant explosion in Yancheng, in China’s eastern Jiangsu province, rather than the duties. The explosion killed 78 and injured more than 600. DeLisi said that a clearer picture of the tariff impact will emerge with more data and time.

“It is a very, very fluid situation,” he cautioned, adding, “Hopefully, they will come to an agreement during their meeting later in June. All reports are that the Chinese economy is suffering, and tariffs are not helping.”

DeLisi advised that companies look at alternate chemistries and non-Chinese sources to help cut costs, as well as recalculate the price to performance ratios of key products. For example, much of the material coded in Harmonized Tariff Schedule (HTS) 2933 – heterocyclic compounds with nitrogen hetero-atom(s) only – have escaped the tariffs. These include such chemicals as fipronil, boscalid, paraquat tech, picoxystrobin, chlorpyrifos, azoxystrobin, atrazine, and many more.

“Unfortunately, you’re going to have to hunker down,” he said. “Even if they announce an agreement with China tomorrow, the chances are, the U.S. administration is not going to remove all these tariffs immediately.”

All of the tariffs currently in effect will be kept in place, “until they see clear-cut proof that the Chinese have made changes in their laws and processes.”

Watch the webinar on demand to gain more insight from DeLisi, including details on filing for exceptions and watching for traps to avoid.